Today, Hubris And Existentialism, Not “The Missing Comma”

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Hubris (hu·​bris), n. [Gr. Hybris].wanton insolence or arrogance resulting from excessive pride or from passion. That’s what it would be if we were to present today’s blog posting as if our subject matter was important in the current situation. It is also what all of us, unknowingly for sure, have demonstrated in thinking that our agreements could cover every possibility. If any reader had a COVAD-19 provision in their documents before January, we invite you to share it with the rest of us.

Countries have shut down walk-in commerce. In the states and Canada, stores, large and small, are closing “temporarily.” Restaurants, the “saviors” in today’s shop-on-line world, are closing “temporarily.” Hours are being cut back. Rents won’t be paid. Some, mainly marginal, tenants won’t be coming back. Some (pretextually) will use their co-tenancy right to “skinny down” their portfolios. We’ll all fight about the meaning of “force majeure.” We’ll be picking through our leases, open purchase agreements, and loan documents (including loan commitments) in an effort to “get out.” [Read more…]

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Fighting The Last War

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In 1934, Edward P. Warner, writing about the implementation of the National Recovery Act (N.R.A.), expressed the following: “There is a saying that is rather common among the critics of the military profession that ‘soldiers are always preparing to fight the last war.’ Business must not incur the rebuke that it is devoting itself to preparing to sell goods under the conditions of the last economic cycle.”

The language is a little “1934” stiff, but the message remains relevant. We shouldn’t be structuring deals for the future as if the future will be unchanged from the past. That’s not to say we should fashion every deal tabula rasa (as if on a blank slate). Of course, much of what has worked in the past remains valid today. But, “much” falls short of “everything.” The trick is knowing what to save and what to discard. Until a genuine “crystal ball” is invented, we’ll need to divine the future unaided by a magical device. Instead, what we all need to do is to pay attention to early trends, some of which have been in front of our eyes for years, even decades. [Read more…]

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Time And Deals – Of Mice And Men – Shake A Leg

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Today’s blog posting will reflect that not much thought has gone into writing it. That’s because we realized that it wasn’t going to get measurably better if we picked through it, questioning every phrase, discussing each element with friends and family, and then, after hearing everyone’s “free” advice,” starting all over again. You see, we’ve seen too many others do that with letters of intent (aka: deal sheets).

A lot has been written about whether a letter of intent should be detailed or just cover economic points. Ruminations has added to that body of literature. So, we won’t repeat what we’ve written. That can be seen by clicking: HERE or HERE. A lot has been written about whether (or how) a letter of intent can become an enforceable agreement. Ruminations has added to that body of literature. So, we won’t repeat what we’ve written. That can be seen by clicking: HERE or HERE. [Read more…]

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Keep It Simple Stu…

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Who hasn’t heard this or something like this? “Can we just make it simple and do a lease amendment instead of a whole new lease? We don’t need a new lease and it will save us money.” Often, that’s a hint that there’s going to be a big bill. And, worse, later on, when a question comes up, there will be another bill.

Ruminations isn’t talking about simple changes. For those, an amendment will almost always suffice, especially if it covers only one or two changes. But what about a lease assignment combined with a space reduction, some construction, a change in maintenance responsibilities, a letter of credit instead of the cash security deposit, and you get the idea. [Read more…]

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No Shopping Clauses (Not What You Think)

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Here’s a scenario that doesn’t happen often but happens much too often. A tenant and a property owner work out a tentative deal. They put the basic terms down on paper and call it a deal sheet or elevate its name to a Letter of Intent. Either way, they don’t intend to be bound to make a lease, but they understand that they’ve agreed to negotiate in good faith to reach one.

So, they then start to work on the lease. There are some issues, but nothing that would thwart agreement UNTIL a better deal comes along. Perhaps the landlord finds another prospective tenant and negotiates with that prospect in parallel with the first one. Perhaps a nearby location that the initial prospective tenant had seen and liked better has come back on the market and discussions with its landlord are now taking place. Fair enough, but didn’t the two parties with the deal sheet or letter of intent explicitly or implicitly agree to negotiate in good faith? Yet, even as late as when one party, usually the tenant, has signed what was thought to be the final, execution copy of a lease, the other party pulls out. Then, it turns out that a few days later the retracting party signs a lease with someone else. [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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Can You Back Out Of A Deal If The Agreement Is Still Unsigned?

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Anyone who hasn’t asked this question or been asked this question just hasn’t been around long enough – “Now that the final agreement has been prepared, are we obligated to sign it and go forward?” There’s no need to scroll down to the bottom for an answer. We’ll put it right here, up front – “It depends.” “It depends” doesn’t mean: “No.”

There’s a companion question that gets asked – “What if we, up front, say that we can back out at any time before signing, for any reason or no reason at all”? There’s no need to scroll down to the bottom for an answer. We’ll put it right here, up front – “It depends.” “It depends” doesn’t mean: “No.”

Today’s blog posting is mostly the following story, one that illuminates the questions we’ve begun with.

As part of an on-line, sealed bid auction sale of non-performing loans, prospective bidders were presented with a required form of asset purchase agreement.  The successful bidder would be required to sign that agreement. Interested buyers were invited to present “indicative” bids. Based on those indicative bids, the seller would select acceptable candidate-buyers and those parties could perform pre-bid due diligence for the offered loans. [Read more…]

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Subject To What Exactly?

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Today’s blog posting deals with the always “fresh” question about whether making something “subject to winding up with a signed, written agreement” allows the parties to walk away without having to look back. The answer we give today, however, may not be very satisfying to many readers. And, to those who find the answer of interest, rarely will they be able to apply today’s answer to any problems that reach their way.

Have you ever wondered what is really meant when we write that a letter of intent or other form of agreement is “subject to” one or more conditions? Basically, what is the meaning or scope of those two words: “subject to”? If there is any lesson to come out today, it might be that we should be much clearer than “subject to” before the parties are bound to an agreement or to perform an obligation under an agreement. [Read more…]

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