What Do You Mean When You Write: “Subject To”?

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The augurs of ancient Rome prognosticated by inspecting the entrails of birds. Similarly, courts divine meaning by interpreting the detritus of our documents. When we don’t leave a clear message behind, those who follow get to tell us what the words we used meant. Sometimes they are right; sometimes not.

Ruminations now rushes in where fools fear to tread. We’re going to extract some lessons from a Supreme Court of Texas decision about mineral rights and royalties. Bless those who labor in that world. If we get something wrong in this world of oil and gas and other things extracted, we’re sure to hear from those whose world we are about to invade.

When a married couple purchased a certain 55-acre property, their seller “reserved” a 1/4 mineral interest (actually an NPRI – a non-participating royalty interest) in the property. That means the original owner would continue to get 1/4 of the benefits from all oil, gas, and minerals extracted from beneath the property.

Property ownership involves what is likened to a “bundle of sticks.” That means there are many rights embodied within the concept of ownership. These rights can be separated and different owners can own different rights in the same property. So, in the “mineral rights” concept, one party can own the property’s surface and another can own the subsurface portion. Similarly, one can own all of a property’s land right down to the earth’s core, excluding the minerals in that “dirt,” and those can be owned by another. Just like a “total” property can have multiple owners, so can those minerals. So, here, the married couple had a 3/4 interest in the property’s minerals and their seller kept a 1/4 interest. So far, so good. [Read more…]

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Where Can I Sue You?

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Is your forum selection provision mandatory or permissive? What’s a forum selection provision? That’s the one your agreement says where you can file suit to enforce your agreement. What is often confused with a forum selection provision? That would be a choice of law provision. That’s where the parties agree as to which state’s law will apply to their agreement. Once you are properly in any state’s courts, those courts can apply whatever law you’ve agreed should be used. It doesn’t have to be the law of that state. [Yes, there are exceptions, but that’s the overriding principle.]

This isn’t going to be a treatise over whether a court will accept jurisdiction over an out-of-state dispute. One reason is that it varies from state to state. Some states don’t want to get involved, but others “almost” solicit the business. For example, New York’s General Obligations Law (GOL) says that, with certain commercially irrelevant exceptions: [Read more…]

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Price; Quality; Time – Pick Two

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It is Labor Day weekend (and the start of Labor Day week). Ruminations has tried to present short blog postings on such weekends. Frankly, we’ve not been successful. Today’s posting is yet another attempt. So, with 30 words already behind us, here we go.

In the management field of study, there is something called the “Project Management Triangle.” We’re not sure when we first heard the term or discovered the concept it describes. So, when we went to research some “history,” we discovered it isn’t really an obscure secret in other fields of endeavor. Based on long experience though, our industry doesn’t yet seem to have discovered the concept. The “Project Management Triangle” has a number of other names: “Triple Constraint,” “Project Triangle,” and “Iron Triangle.” [“Iron Triangle” is also used to describe an aspect of Washington politics, and we leave the reader to explore that form of its use on her or his own.] [Read more…]

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Notwithstanding Anything To The Contrary Contained Herein

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When a carpenter or other craftsperson needs to make “that final adjustment,” she or he reaches into the toolbox and out may come a shim. We’ve all seen shims used, but not everyone knows they have a name. Those wedges, washers, and thin strips of material used to align parts or make them fit are called “shims.” We who draft agreements of every type also use shims. Reluctant as Ruminations is to use the word “all” and mean “all,” today’s use seems accurate. Who among us hasn’t slipped in at least one “notwithstanding anything to the contrary” into every agreement longer than several pages? That’s using a shim because it makes the parts of the agreement “fit” together.

Basically, this shim is used in two circumstances. The first is where, after reading what we’ve written, we realize that our crafted provision isn’t exactly right. We realize that there are one or more circumstances that don’t fit what we’ve written. We realize that what we’ve written needs adjustment. We’ve got to carve out some exceptions. So, instead of rewriting the provisions to make them say what they should say, we append a list of those things we realize don’t fit – but not of those things we didn’t realize don’t fit. [Read more…]

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As Set Forth On Exhibit A (Not Actually) Attached Hereto

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As we were reading a very recent decision issued by the Supreme Court of Alabama, we once again were preparing to write how wasteful it was for the parties to litigate the issues raised. This urge happens often enough that Ruminations has considered preparing “boilerplate” language to be inserted at the end of many blog postings. Then we got to the concurring opinion. It could apply to many of the “manufactured” disputes created by one party or the other and supported by their advocates. Though the following words by that concurring justice give away part of the story we are going to tell, its content and tone resonate with Ruminations. We suggest that we all step back each time issues like these arise and reconsider our thoughts about litigating them.

[Read more…]

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How Do You Spell Trouble? ROFR, ROFO, ROLO, ROFN? All?

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Last week we expressed the belief that very few tenants are “entitled” to receive a Right of First Refusal (First Offer, Last Offer, First Notice) and that very few landlords should give in when any of these are requested. We also wrote that we didn’t think any deals would go south if the landlord said, “No.” Well, that’s the ideal world as seen by Ruminations. But, we also live in the real world. Sometimes leases give tenants one of those rights.

On August 4, 2013, in our 125th blog posting (this is our 383rd), we used this title: “What Were You Thinking? Was It a ROFO, ROFN, ROFR or ROLO?” Those who weren’t with us five years ago and those with sieve-like memories similar to our own, may want to visit that posting. That’s easy – just click: HERE.

The biggest issue with a landlord giving one of these rights to its tenant is not a legal one; it is not a business one; it is much simpler. Most landlords forget they’ve given them. It’s one thing to know that you’ve got to look at a lease to find its notice requirements. That’s a regularly occurring event and landlords develop the habit to do so. It’s the same thing when a landlord wants to send out a default notice. It knows that every lease is a little different and every lease has such provisions. So, it becomes a habit to look. [Read more…]

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Just Say No To The Request For A ROFR [What Say?]

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A contract, such as a lease, gives one party, say a tenant, a right it would not have without the agreement. That means the other party, in the case of our example – the landlord, has an obligation it would not otherwise have had. That’s the essence of a contract – an exchange of rights for obligations or duties. Think about it, without some kind of enforceable agreement, a lease (oral or written), a license agreement or a use and occupancy agreement, what right would a tenant have to possess its premises and what obligation would the owner have to allow it?

In real property law, a lease is a conveyance of an interest in real property just like an ordinary deed is a conveyance of an interest in real property. The difference is that an ordinary deed, one that conveys what the law calls a “fee simple interest,” gives the “grantee” the entire “bundle of rights” that come with ownership. A lease gives the grantee (the “tenant”) an “estate for years.” An estate for years has a “termination date,” a date upon which the tenant loses the right to remain in the premises. Basically, the tenant does not get any “ownership” rights after that date. [Read more…]

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Did They Guaranty The Lease For Its Extended Term?

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We’ve written about guaranties before, most directly in postings that can be seen by clicking: HERE and HERE. Today, we drill down to the enforceability of a lease guaranty after the lease has been modified, but without notice to or knowledge of the guarantor. Today’s Ruminating is informed by a January, 2018 unpublished opinion from the Maryland Court of Special Appeals. [Readable by clicking: HERE.]

A church’s lease was guaranteed by its Pastor, his wife, and six other church members. The church defaulted and its landlord sued for the remaining rent under a three-year extension properly signed by the Pastor on behalf of the church, but without the knowledge of the six church members. In fact, they didn’t even have a hint that the lease had been extended despite each being some form of “leader” in the church, though those roles appeared to be substantially ceremonial. Their only financial connection to the church was their obligation to tithe to it. The lower court described them as “commercially” unsophisticated.

The lease extension was by way of amendment. The lease did not have an extension option. The additional three-year term was related to a rent reduction sought by the Pastor and agreed-to by the landlord. The church performed until it didn’t with eight months to go in the lease’s term. At that time, by agreement with its landlord, the church vacated its premises. [Read more…]

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