Thought Process

Last Updated on Sunday, 27 August 2023 03:05 Written by Chris Griswold Thursday, 14 May 2020 09:08

During this pandemic, people are asking certain business questions.  While it’s not my intent (nor possible) to get into the weeds on everything, I do want to help shed some practical light on some things for folks.  This is good stuff for everybody to know… (don’t forget to click on my links below to also see my short video on this material).

Thought Process

Question #1:   What is the big picture of what’s going on right now?

Answer:  First of all, there’s not a lot of precedence on this sort of situation – it’s never happened.  The legal topics of impossibility, Force Majeure and others are, up until now, rather dusty, largely unused legal doctrines that haven’t seen much daylight in our modern court system.  Secondly, on public policy grounds, courts don’t want business owners held to difficult standards (i.e., normal financial rigors, like making normal/ordinary, full amount rental payments) which can’t easily be made during a shutdown.  However, what isn’t being said yet is that neither (as time goes on, and events play out) will courts want to invalidate/rescind/cancel every contract that was entered into before the pandemic just because business became more difficult to conduct – as that would be anarchy and destabilizing to our economy.

Question #2:  We’ve lately heard much about certain “defenses” to the enforcement of contracts, like legal “impossibility,” “frustration of purpose,” and “Force Majeure.”  What’s going on with these?

Answer:  You could spend a lot of time and money right now getting handles on these, but let me try to make it as simple as I can….

Force Majeure:  This is a clause that is sometimes used in contracts.  To be effective and applicable, it must be stated in your contract.  It apportions the risk of economic loss to either one party or the other.  It covers both man-made and naturally occurring events and will have to, through litigation, be declared to apply to this pandemic (assuming it is stated in your contract).  If your contract doesn’t have this provision, it’s understandable, as this sort of thing hasn’t made this sort of provision as popular or necessary as it’s now become.  Also, if it’s not in your contract, don’t dismay – if it had been, such risk may have been apportioned to you….  Either way, if it’s not in your deal, the common law attempts to make up for such omission by giving everyone the benefit of it in the form of “impossibility,” “frustration of purpose” and other common law defenses to the enforcement of contracts.

Common law defenses:  These do exist (and always have), but they have to be successfully proved by the party claiming them, in litigation.  Furthermore, courts (historically speaking, on public policy grounds), don’t like to undo deals, unless it’s completely necessary.  Without dragging you through lots of legalese and process, what will likely happen is the courts will, if they do anything, entertain “temporary impossibility” claims – where defendants answer petitions with claims that they, for a certain period of time, couldn’t pay their bills (or full bills) during the shutdown – and, in some cases, rightfully so.  Courts are most likely to uphold “objective impossibility” defenses more often than “subjective impossibility” defenses.  Objective means, no one could have performed under the contract, and subjective means I could not perform under the contract.  Bear in mind, courts do expect business owners/operators to be able to make it through a crazy month or two of bad business, while continuing to pay their bills (as “rainy days” do come, for us all).

Question #3:  Is my business excused from paying rent during this shutdown?

Answer:  That’s going to depend upon a number of things, as I’ve been cracking the lid on above.  For example:

• If you’re a landlord, the Court will inquire on whether your lender granted you a forbearance as you pursued a non-paying tenant.  Did you try to reasonably accommodate your tenant, entertain any sort of compromise or extension of the lease term?  Did you offer some reduced rent for a month or two or three, during the shutdown?
• If you’re a business owner, did your business receive payroll relief stimulus?  How was it used?  When did you finally apply for it?  When did you actually receive it?
• If you’re a debtor or a tenant, were you not current on your bills, even before the pandemic?
• If you’re a tenant, did your landlord really try to work with you, propose to you temporary forbearances (e.g., that extend the ultimate lease term out the same amount of time as the shut down lasted) and other good faith measures – all while you (as the tenant) refused to even return their emails and phone calls?
• If you’re a tenant, rent aside, were you at least willing to pay your lease triple net charges during the shutdown (did you even offer to pay these, or, at least try or represent to your landlord that you would try to pay these)?

At the end of the day, if the courts do anything by way of these common law defenses to contracts (hard to tell as of yet, since the courts are not open for normal, “business as usual”), they’ll look at how long the economy was shut down in relation to your business, and possibly how the strange, Corona-economy actually affected your business.  For example, Lowe’s and Home Depot have been seemingly flooded with business during the shutdown – since people are stuck at home and not working as much right now.  In otherwords, some businesses have done even better during this pandemic than before.  So, be ready to produce financials if you’re claiming that you didn’t pay your bills during the shutdown because of the pandemic.  Either way, try to be cooperative, reasonable, responsive, productively creative at problem solving and deal in good faith with your business partners during this difficult time.

What My Clients Are Saying

“Chris Griswold is an attorney that will find reasonable solutions in an economical manner to fit my clients’ best interests. My growth of knowledge of the legal system and use thereof for my clients can be contributed in a large part because of Chris Griswold’s personal willingness to educate and strengthen my knowledge on the laws. Good results from a good law practitioner like Chris are always best and hard to find it seems.”
John W. Meek, RPA / Owner, First Commercial Management, Inc. / Oklahoma City, Oklahoma

The information presented within this article is of a general nature and is not intended to be relied upon as legal advice in any particular matter without first consulting qualified counsel.

Ice, Ice Baby

Last Updated on Sunday, 27 August 2023 03:06 Written by Chris Griswold Wednesday, 19 February 2020 02:02

Icy, snowy, slippery sidewalks (say it 3 times fast).  We’ve all seen our share this winter.  In response to a large number of inquiries I’ve received from concerned hotel, restaurant, office and retail owners and tenants, as well as the several requests I’ve received from our local insurance underwriting community that I write on the topic, I wanted to write a short piece in the hopes it saves some of you needless worry and, possibly, money.  Accordingly, I’ll answer the two most commonly asked questions from the groups mentioned above.  This should be helpful to everyone… (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Ice, Ice Baby (Vanilla Ice, To The Extreme, 1989)

Question #1:  “If I put out snow melt on my sidewalks, does it somehow serve as an admission of guilt if someone should subsequently slip and fall on the premises?”

Answer:           No.  The very act of putting out snow melt, etc… in an effort to prevent people from slipping, falling and hurting themselves cannot later be used against you.  In other words, you can’t use someone’s efforts to avert an accident against them later on if and when the accident occurs.  If you could, it would be tantamount to saying “…I’m suing you for trying to help me.”  Now, there are other relevant factors including, but not limited to, whether or not another person slipped and fell in the same area just before the plaintiff slipped and fell, whether you put out enough – and many others.  However, the fact that you put out snow melt, in and of itself, is not an admission of guilt; nor can it later be used against you in showing negligence.  Accordingly, don’t be afraid to put out snow melt when the weather gets bad.  However, and most importantly, when you put it out, put out enough to really do the job (including getting out your shovel if need be so the area(s) in question are clean, clear and safe).

Question #2:  “When should I put out snow melt?”

Answer:          It depends.  Actually, the legally correct answer to this question is “when it’s reasonable to do so.”  Say what??!  I know…, it’s legalese and not really clear.  However, you can pretty much nail it down if you ask yourself the following question: “Given the current weather conditions; if my mother came to see me at work today, should I put out snow melt?”  If the answer is yes, put it out.  Otherwise, don’t sweat it.

What My Clients Are Saying

“Chris Griswold was instrumental in negotiating a very solid, long-term lease for our bank branch in Oklahoma City.  His industry knowledge helped us avoid several potential pitfalls with a landlord that was somewhat difficult at times.  It was a pleasure to work with Chris because of his professional style and easy going demeanor.”
Charlie Crouse / Simmons Bank / Oklahoma City, Oklahoma

Things To Remember

Last Updated on Sunday, 27 August 2023 03:06 Written by Chris Griswold Friday, 17 January 2020 06:46

It’s a New decade, and there’s lots going on….  Often, growth is accompanied with debt (and debt forgiveness), the extension of credit, and a little tax/bankruptcy information thrown in.  Here’s some good, basic, “blocking and tackling information” for those out there growing.  The questions below are ones I’ve recently been receiving from different areas of our economy.  This is good stuff for everybody to know… (don’t forget to click on my links below to also see my short video on this material).

Things To Remember

Question #1:  I’m a business person considering taking on debt in the form of mezzanine debt, what is that and what are its considerations?

Answer:  It’s where a bank loans you money against your interest (whether a majority or minority interest) you hold in an entity – usually a form of unit ownership held in a limited liability company.  It’s secured against the unit ownership you hold, but it’s really unsecured debt in the eyes of the bank.  Accordingly, the rate of interest charged is pretty high, like all unsecured debt – at least higher than most other forms of debt.  So, be aware.  This isn’t as common as it used to be, but it’s still very much alive and well on a national level.  If possible, you might want to instead look at obtaining a loan from your bank against your other hard assets, which can even be your accounts receivable.

Question #2:  I’m a business owner who needs a loan to purchase a major piece of equipment, what can I expect when working with my banker?

Answer:  Once qualified, your bank will want to file a financing statement (with the public filing authority) which secures their interest against such collateral.  It will occur in the form of a UCC -1 (a Uniform Commercial Code, Form 1 filing) which is filed with the local jurisdiction’s Central Filing Office.  Until this UCC-1 is released by the later filing of a UCC-3, the bank continues to hold a valid security interest in such major piece of equipment (which will only occur once the loan is paid off).

Question #3:  Are there ever any problems with the filing of UCC-1’s?

Answer:  Yes, due to a bad, inaccurate, incomplete, or poorly described collateral, the collateral interest held by the bank may either be: 1) so vague as to render the bank’s interest unenforceable against its own collateral, and/or 2) so broad as to arguably also encumber other equipment you own, although unintentionally.  Either way, both of the foregoing are a bad outcome, so, be attentive to describing collateral in UCC financing statements.  Use the unique serial numbers on each piece of equipment, if they’re available.

Question #4:  I’ve had certain debt forgiven which all surrounded my previous bankruptcy.  What should I know?

Answer:  Once forgiven and you’re 1099’d, it’s declared income, and you need to pay the appropriate tax rate upon such forgiven debt.  So, plan accordingly.  Bankers, also be aware to ask this question.

Question #5:  As I’m trying to make a fresh start in a new venture, I have unfiled tax returns from years past that led up to the granting of my recently received bankruptcy discharge.  Will the taxes due and owing in connection with such previous tax years be included in my discharge? 

Answer:  No, not if the tax returns for such previous tax years weren’t done.  Much to the surprise of many, such amounts are not discharged and made a part of your discharge if the returns were not made and timely filed.  This is something the banking community should also be aware of when writing new loans….

What My Clients Are Saying

“Chris Griswold has a unique skill set for a Real Estate attorney.  He is equally adept in the courthouse as well as in a transactional setting.   We have worked with him in lease negotiations where we found him to be pragmatic and fair minded while representing his client.  As result of working on the other side of the table with Chris, we engaged him to assist us with various lease enforcement issues.  We have used many attorneys to assist us with FED’s, collections etc. and Chris has by far been the most efficient and cost effective counsel we have ever used.”
Jeff Norman /  President / JAH Realty, L.P. / Oklahoma City, Oklahoma