Untangling Tenants From their Invitees and Licensees

Last Updated on Sunday, 27 August 2023 03:10 Written by Chris Griswold Monday, 11 June 2018 09:15

Tenants in commercial leases are liable for a lot.  In some cases, they’re even liable for the acts, omissions and negligence of their invitees (customers) and licensees (sub-contractors, vendors, kiosk operators, christmas tree/pumpkin parking lot sales outfits, etc…) – but they don’t have to be if the lease is well written.  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Untangling Tenants From their Invitees and Licensees

Question #1:  So what is the big deal for a Tenant to be liable for these groups?

Answer:  Well, ultimately, it’s a mark down on that Tenant’s profitability.  It’s an added cost of doing business, on top of taxes, rent, employee salaries and benefits, CAM, and the list is customarily long.  So, why add one more item to it?

Question #2:  How can a commercial tenant ensure that it’s not liable?

Answer:  The lease has to carve out a Tenant’s liability for these groups.  It’s one thing (and normal) for a Tenant to be liable for its own officers, directors and employees, but, it’s another for that Tenant to be liable for other extended persons which are not under the control or direction of Tenant – that extension/enlargement beyond the Tenant’s officers, directors and employees is what must be examined closely before a lease is finalized.

Question #3:  Is there anything more at risk in this situation?

Answer:  Yes.  If Tenant fails to eliminate this extension of liability, it will cost not only Tenant, but possibly the Tenant’s Landlord as well, unless the Landlord puts language into the same Lease that makes the General Liability coverage that Landlord carries subject to carve-outs that Landlord’s General Liability coverage shall all be secondary, non-primary, excess and non-contributory to Tenant’s coverage, as well as making Landlord’s coverage further subject to a Waiver of Subrogation clause in the Lease.

Question #4:  What should Landlord’s really do?

Answer:  In diametric opposition to the statements in Question/Answer #2 above (which are to Tenant’s favor), Landlord’s shouldn’t let a lease get written that allows Tenant to avoid liability for the acts, omissions and negligence of such Tenant’s invitees and licensees.  In other words, Landlord wants Tenant to be liable for these – or they become Landlord’s liability.  Remember, leases are the product of good negotiation and the parties need to know what points are really important to them, and then act accordingly.

Question #5:  Will Landlord or Tenant win?

Answer:  Unless the Tenant is a huge anchor in the center, Landlord will usually win (because Landlord’s insurance underwriter will require Tenant to be liable for its own licensees and invitees, at least in situations involving accidents occurring within the demised premises itself).

What My Clients Are Saying

 “Chris is a business-minded attorney who negotiates with the client’s goals in mind.  He is a knowledgeable and constructive participant in deal negotiations… loyal to his clients but practical in his approach.”
Bond Payne, Jr. / Vice Chairman of Corporate Development, Argent Financial Group / Oklahoma City, Oklahoma

Understanding Legal Terminology Used In the Uniform Commercial Code

Last Updated on Sunday, 27 August 2023 03:10 Written by Chris Griswold Thursday, 8 March 2018 12:32

The commercial transactional world is driven by certain, basic, legal terminology that appears in many contracts.  Understanding some of these better helps everyone.  In the world of commercial transactions (between commercial parties), there are actions and behaviors that have previously occurred either between the same or different sets of commercial parties (which are commercial buyers and sellers of goods – and all governed by the Uniform Commercial Code) that, over time, come to govern the future actions and conduct of such commercial parties, in the event of a dispute that later occurs between such parties.  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Understanding Legal Terminology Used In the Uniform Commercial Code

Question #1:  What does “course of performance” mean? 

Answer:   In the event of a later dispute between two commercial parties, the court can look towards the past behavior of such, same two parties which has occurred over the course of time on the same deal.  For instance, if a buyer has been taking delivery of certain goods from the seller on a certain calendar date of the month for a long period of time, then, the failure of the seller to deliver on such date or the buyer to accept delivery on such date (whether or not the calendar date is set forth in the written contract, if any) shall be very persuasive in such later dispute.  In other words, the failure of either party to perform on such calendar date, after having performed on such date over a long period of time, disturbs the status quo of the relationship – a bad thing; the Court having jurisdiction over the dispute will view things through this lens.

Question #2:  What does “course of dealing” mean? 

Answer:  Same fact pattern as above, however, the Court can instead look at the past behavior of the same two parties which has occurred over the course of time on other deals (not the same deal).  In other words, the failure of either party to perform on such calendar date will be compared against how the parties have gotten along, for example, the twenty years before on other deals that they’ve done together.  Why the change?  Well, it might be because the matter at issue has never occurred on the same deal in question, but it has happened on other deals they’ve done together….

Question #3:  What does “usage of trade” and “industry standards” mean? Why would they be used? 

Answer:  Same fact pattern as above, however, in the absence of any deal history between the same two parties at issue which might serve as a guiding light in the matter at issue, the court will look at how other, similar parties behave under the same circumstances.  The way such other, similar parties behave can be discovered by: 1) looking at “usage of trade” (which is how certain business terms and dates are generally defined or handled by other, similar parties who conduct the same sort of trade together), and/or 2) by looking at the prevailing “industry standards” which are common and prevalent in the same industry at issue – that they can persuasively settle or resolve the matter at issue.  In such a situation, the Court uses these external customs, terms, practices or methods to resolve the matter at issue between such two commercial parties.

What My Clients Are Saying

“We needed some work done that, to us, seemed daunting.  Chris walked us through the entire process, without a bump in the road.  He made it easy.  Chris is the consummate professional.”
Russ Florence / President & COO, Schnake Turnbo Frank / Oklahoma City, Oklahoma

Understanding Legal Terminology As Regarding Obligations

Last Updated on Sunday, 27 August 2023 03:10 Written by Chris Griswold Wednesday, 7 February 2018 01:39

The commercial business world is driven by certain, basic, legal terminology that appears in many contracts (by whatever name called).  Understanding some of these better helps everyone.  At the top of the list of commonly used terms (which are very worth discussing) are the usual qualifiers that condition the quality of effort that a party must employ in order to meet its contractual obligations.  Good stuff.  See more below (and don’t forget to click on my Facebook or YouTube links below to also see my short video on this material).

Understanding Legal Terminology As Regarding Obligations

Question #1:  What does “good faith efforts” mean? 

Answer:  We’ve seen this term used in contracts.  It means that, however the context reads within the contract, the subject party must actually employ some sort of effort.  For example, if a purchase-sale contract reads “…the Buyer must employ “good faith efforts” to ensure that no confidential information obtained from Seller or Seller’s agents, contractors, employees or representatives during the Due Diligence Period is disclosed to any third party(ies) without the written consent of Seller…,” it means that the Buyer must somehow prove it somehow actually attempted to keep certain information (which later leaked out to a third party) from leaking out to such third party – through the actual use of some sort of effort.  For instance, Buyer, in advance of such leak, sent out emails or texts to its own agents, contractors, representatives and employees to keep such information secret from (and undisclosed to) third parties.  That way, later on, when the leak occurs, the Buyer can point towards the emails or texts it previously sent out as proof that it actually, in good faith, made some sort of effort to prevent the leak that later occurred.  This is the lowest standard folks, and not very hard to satisfy.  [Note:  this contract is for a major, multi-million dollar transaction folks.] 

Question #2:  What does “reasonable efforts” mean? 

Answer:  Insert the phrase “reasonable efforts” into the foregoing fact pattern.  It means that the Buyer does something more lofty to prevent the leak.  For example, Buyer sent out certified letters to its own agents, contractors, employees and representatives, and, in addition to that, Buyer held a one day required orientation at its headquarters whereby all of Buyer’s agents, contractors, employees and representatives attended a non-disclosure orientation/seminar to receive instruction on how to best prevent leaks of such confidential information during the then, forthcoming due diligence period.  This is a higher standard folks, and harder to meet.  Why?  It expects a subject party to do what another “reasonable person” would do to prevent the leak….  So, even more must be done to meet this higher standard than simply a good faith effort.

Question #3:  What does “best efforts” mean? 

Answer:  With “best efforts” inserted into the fact pattern, you’re basically holding the Buyer to the highest standard imaginable; so much so that, if a leak later occurs, it’s basically Buyer’s fault, period.  How so?  This highest standard basically means that, unless it somehow becomes impossible to prevent the leak, then any leak that later occurs is the fault of Buyer.  The only way to prove the “impossibility of preventing the leak” is to show that someone died behind the wheel of a car before they had a chance to communicate well, or, a flood or natural disaster occurred which prevented Buyer from preventing the disclosure which happened after the office floated away and the sensitive papers were later found upon the banks of a river by the children of the Seller’s competitor (which is a Force Majeure exception, if such exception is drafted into the contract itself).  So, be careful of someone putting a “best efforts” obligation upon you.     

Question #4:  What do you need to remember about using these various terms?

Answer:  You need to remember which party you are, what the obligation is at hand, and how much control you actually have in getting something done or preventing something from happening.  Don’t bite off (or accept the obligation to bite off) more than you can chew.

What My Clients Are Saying

 “Chris Griswold is a good business attorney whom I’ve used often and much through the years, for both my business and personal needs, and whom I’d gladly refer to anyone.  He’s creative, prompt, eager to help and very competent.  He’s good at what he does, he has fun doing it, and it shows up in his work through his good problem solving skills.  Chris is great.”
Edward F. Wells / President, Wells Nelson & Associates / Oklahoma City, Oklahoma