Who’s On First? Keeping Track Of Basic Facts

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Please don’t ask for the central theme of today’s blog posting. We’ve done so already and came up empty-headed. The closest we’ve come is that we’re writing about how a stitch in time saves nine.

The genesis of today’s subject is a very simple case that reached a California appellate court. It probably isn’t worth looking at, but for those compelled to do so, the February 2, 2017 decision can be seen by clicking: HERE.] The court was confronted with a situation where, on its face, the signatory to an indemnification agreement was not authorized to sign the agreement on behalf of the indemnitor (the one who would have to pay). There was no indication that the document was signed with the intention of fooling anyone. It appears that the person signing the agreement was confused or ignorant as to “who” should have done the signing. We’ll explain.

There were two limited liability companies. One was the sole manager of the second. We’ll call the first company, the parent, and the second, the child. The parent had a managing member. He was the kind of person who breathes, unlike, say, Citizens United. He could sign on behalf of the parent, but when signing for the child, the “proper” signatory would be “by parent, as sole member of child, by breathing person, as managing member of parent.” Get it? If not, then realize that the “person” who could sign for the child was the parent. But, because the parent was an entity who could not hold a pen, a “real” person needs to sign on behalf of the parent. [Read more…]

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We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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Rely On Your Own Insurance And Stop Arguing About It (Again)

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It doesn’t matter how much you want to continue riding. Beating a dead horse isn’t going to get you anywhere. Or, so we have been told. Nonetheless, we are going to say, for the umpteenth time, landlords and tenants should carry AND RELY UPON their own insurance policies.

But, why should I? After all, can’t I just be happy knowing that I am an “additional insured” on the other’s commercial liability policy? [Just to make the Ruminations position clear: NO.] Before we elaborate on “here’s why,” we’ll digress. [Casablanca: “I am shocked – shocked – to find out” that Ruminations will digress.] Find us the person that couldn’t have spent more time with friends and family if she or he hadn’t been on the phone arguing with someone over the “additional insured” language in a lease, mortgage or other agreement. [Read more…]

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Don’t Expect A Thank You Card From The Insurance Carrier

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We’ve written about many of the “elements” implicated by today’s blog posting, but don’t think we’ve ever illustrated them in the context of a specific lease provision. Among them are the concepts of “no-fault, risk shifting” and “not spending negotiating capital, effort, time or money” on protecting an insurance company (unless you happen to be working for one).

Take a look at the following provision. We don’t offer it as the “perfect” text for every lease or, for that matter, any lease. You’ll have to decide that for yourself. We offer it so that we don’t have to stop writing this posting when you reach the upcoming period.

None of Landlord or Landlord’s agents, partners, members, employees or any other person acting on behalf of Landlord will be liable for, and Tenant waives all claims against Landlord and Landlord’s agents, employees, members, directors, contractors, and those acting for or under Landlord for any and all loss, cost, liability, damage and expense (including attorney’s fees and disbursements), penalties or fines incurred in connection with, or arising out of, any damage to, or loss (by theft or otherwise) of, any of Tenant’s property or of the property of any other person, irrespective of the cause of such injury, damage or loss (including the acts or negligence of any other tenant or occupant of the Shopping Center or of any owners or occupants of adjacent or contiguous property) and whether occasioned by or from explosion, falling plaster, broken glass, electricity, smoke, wind, water, snow or ice being upon or coming through or from the street, roof, subsurface, skylight, trapdoor or windows, electric wiring, plumbing, dampness, water, gas, steam or other pipes or sewage, or the failure of the air conditioning or refrigeration system, or the breaking of any electric wire, the bursting, leaking or running of water from any tank, washstand, water closet, waste pipe, sprinkler system, radiator, or any other pipe in, above, upon or about the Leased Premises or the Building or the Shopping Center, or which may at any time hereafter be placed therein, or from any other cause whatsoever.

[Read more…]

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Broad, Narrow, Whatever! Do You Write Right?

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Although today’s thoughts were inspired by a very recent California Appellate Court’s decision concerning the wording of an arbitration clause in a non-real property agreement, they could well have come out of a dispute of an indemnity clause in a real property contract or, for that matter, out of many other kinds of contract provisions. What made the June 1, 2016 decision most striking was that the court found an arbitration provision to be inapplicable to the dispute at hand despite the extremely strong public policy in favor of arbitration. This is quite surprising because one should never bet against a court finding an arbitration provision enforceable even if supported by only the slimmest of reeds. [Read more…]

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How Do You Make A Turtle Fast? Take Away Its Food.

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Ambiguity: am·bi·gu·i·ty (ambəˈɡyo͞owədē/) – noun – uncertainty or inexactness of meaning in language. Secondary meaning: what we write into our agreements so that generations of lawyers can send their children to law school.

Should we illustrate an ambiguity? Of course, what is Ruminations waiting for? Here is a disputed provision from the property purchase agreement in front of a United States District Court whose May 19, 2016 decision can be read by clicking HERE.

Buyer expressly releases Seller and agrees to waive all rights that it may have to seek contribution from Seller for any response costs or claims that may arise as a result of the actions or inactions of Seller and any previous owner, operator or third party on or with respect to the Property relating to Hazardous Substances.

Now, here’s the story, very little of which will be found in the court’s decision. An aluminum producer operated a factory in ten story, reinforced concrete building adjacent to a serious river. Its manufacturing process required furnaces to heat aluminum billets to soften them for shaping. The billets (and other items) were moved with fork-lift trucks. Those trucks had hydraulic lifts. Normal hydraulic fluid has a relatively low flash point, making use of the forklifts near the furnaces “unwise.” [Read more…]

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For What Did You Intend To Indemnify? Choose Your Words Carefully!

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Today, we’re going to discuss two legal issues, one old and one new. The old one has to do with the use of extrinsic evidence, but with an interesting twist. “Extrinsic” means information coming from the “outside,” in our business (agreements, such as a lease), that means information from what was said or what was written before or at the same time the document was signed, but didn’t show up in the document itself.

The second, and the one that has generated a little bit of “buzz,” has to do with the scope of a promise to indemnify someone.

For those readers who like “primary” material, take a look at the California Court of Appeal Order published on December 7, 2015 in the case of Hot Rods, LLC v. Northrop Grumman Systems Corporation. It can be seen by clicking HERE. [Read more…]

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But, Not Everyone Can Get Away With Fraud By Clever Drafting

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Today, we continue our story of how to get away with fraud and deception. For those of you who were, as the Brits say, on “Holiday” last week (yes, England and the United States, two nations separated by a common language), you can catch up by clicking HERE.

Last week, we described how the seller of a company was able to hide behind an agreement’s provision wherein the buyer agreed that it was relying only on the information and representations recited in the agreement. Then, by signing the agreement on the day of closing, it could only complain about what happened between signing and closing. At best, that was a few minutes or so. Perhaps our readers accepted that as fair because the buyer was carefully monitoring the company’s revenues for March of 2012, the critical “test” month. It knew that the sales figures were somewhat implausible and should have known that the “last minute” jump in revenue was “strange.” Maybe, that’s why the Delaware Chancery Court was unwilling to parcel out a little of the “equity” for which chancery courts were developed. (OK, that explanation is a stretch, but we’re not ready to concede that the words “justice” and “business” are in different dictionaries. But, how about the rest of last week’s story?) [Read more…]

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