Redundancy Dangers

Just came from a case law update, and this is worth repeating.

Words matter more than numbers in contracts (at least in Texas). Often, when I see numbers in contracts, I see words followed by numbers, like this... one million seven thousand and no cents ($1,700,000.00). As in, the loan amount is one million seven thousand and no cents ($1,700,000.00).

A careful reader of the above might have noticed that I left out a very important word, "hundred" as in one million seven HUNDRED thousand and no cents.

In Texas, the court found that $1,007,000.00 was the correct reading much to the distaste of the lender and to the joy of the lendee. Ouch for who ever wrote that $693,000 mistake.

That's why I always use only numbers and not words. In a contract, such as a lease, using only numbers increases the readability of the lease (in my opinion), and reduces the chances for a mistake. Also, most leases are already long enough and using numbers goes ahead and shortens what is already a long enough read.

I hope the discussion above has made it clear why it is worth your wild to have a professional advocate on your behalf. As both a commercial real estate attorney and real estate sales agent, I can make sure your interests are protected on both the economic and legal sides of a deal.

If you have any questions or comments, send me an email to bendalton@crecl.com. Also, if you know anyone looking to buy, sell or lease space in Dallas or the surrounding areas, I do appreciate referrals.

Severability Clauses in Commercial Leases

Severability clauses are boilerplate these days, especially in commercial leases. Below is an example of the standard clause...

The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

But subtle changes to boilerplate items can greatly benefit your client in the event of litigation. Consider a typical commercial lease which is often pro-landlord. Any term that gets struck out of a pro-landlord lease is more likely going to hurt the landlord and be of the benefit to the tenant.

So if you are representing a landlord, consider adding the following wording to make an even better severability clause...

To the extent possible, the invalid, illegal or unenforceable term shall be replaced by a term that is legal, valid and enforceable and that comes closest to expressing the intention of the illegal, invalid or unenforceable term.

Doesn't that already look better? Adding those words to standard boilerplate now does an even better job of protecting your client. And it can get even better...

If the application of this Severability provision should materially and adversely affect the economic substance of the transaction contemplated, then the Party adversely impacted shall be entitled to reasonable compensation for the adverse impact, provided the reason for the illegality, invalidity or unenforceability of the term is not due to misconduct by the Party seeking the compensation.

That additional wording to a frequent boilerplate provision does a significantly better job of protecting the landlord. Remember, just because it's boilerplate and has been used for years as boilerplate doesn't mean that it's the best choice.

I hope this demonstrates that every part of any lease must always be closely looked at depending on who you are representing. Even the boilerplate. With contracts, words, whether they are there or not, matter.

If you have any questions or comments, send me an email to bendalton@rebcl.com. Also, if you know anyone looking to buy, sell or lease space in Dallas or the surrounding areas, I do appreciate referrals.