Real Estate Journal — Executive Women in Business — October 30 - November 12, 2015 — 15C
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Executive Women in Business
By Pamela Tobin, Kaplin|Stewart Contract warning: Read the boiler plate!
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ontracting parties are well advised to closely examine the entire
Although Genuardi’s recog- nized that the lease agree- ment did not provide such a discount, Genuardi’s argued that the common law imposed the discount on the contract to prevent the landlord from receiving a windfall. The Pennsylvania Superior Court disagreed, holding that the common law did not permit the discount and the contract must be enforced as written. The Superior Court acknowl- edged that Newman bore the duty of mitigating its damages but held that once Newman had fulfilled its obligation by leasing the space to the two
substitute tenants, paying the remaining lost rent was the breaching party’s responsibil- ity under the lease agreement. The Superior Court explained that as sophisticated parties, they were obligated to draft their agreement “with exacti- tude.” Since Genuardi’s could have included the discount in the default provision, Genu- ardi’s was held responsible for the omission. The Newman decision re- minds us that we need to scrutinize the damage provi- sions in our contracts with the same exatitude that we do with all the major terms of
the deal. Ask yourself could I live with this provision if forced to commit anticipatory breach or does this allow for the right remedies if the other side breaches. At a minimum, if you are the tenant you want to make sure to include a discount in any provision awarding future rents to the landlord for an extended term. Sophisticated parties will take care to secure legal repre- sentation that protects them under even the worst case scenario. Pamela Tobin is a mem- ber of the Commercial Litigation and Land Use
& Zoning Departments at Kaplin|Stewart. Ms. Tobin handles complex commer- cial litigation on behalf of businesses and individuals in both state and federal court. She is a director of the Montgomery Bar Asso- ciation Board and Execu- tive Committee, Co-Chair of the Montgomery Bar Association’s Women in the Law Committee, and a director of the Manor Col- lege Department of Legal Studies Advisory Board. She can be reached at 610.941.2543 or by email at ptobin@kaplaw.com. n
contract and not just the main terms before sign- ing. Unfortu- nately, many contracts un- wisely rely o n b o i l e r p l a t e l an -
Pamela Tobin
guage to the detriment of the contracting parties. For example, “standard” default and damages provisions are not always analyzed for con- sequences in the event of breach. A recent Pennsylvania appellate decision, Newman Dev. Grp. of Pottstown, LLC v. Genuardi’s Family Mkt., Inc., 98 A.3d 645 (Pa. Super. Ct. 2014), illustrates the di- sastrous consequences of this common failure. Newman Deve l opment Group acquired land in Ches- ter County to develop as a shopping center. Newman agreed to lease the main space to Genuardi’s for a twenty- year term. The signed lease was held in escrow until New- man could secure an anchor tenant (Target or Lowe’s). Once the anchor tenant was secured, however, Genuardi’s, which had been acquired by Safeway, decided to terminate the lease. Newman brought suit for anticipatory breach. Although Newman was able to find two substitute tenants (PetSmart and Michael’s) to take over the space, these tenants would only commit to a ten-year lease. Newman’s expert testified that there was only a fifty percent chance that the substitute tenants would re-up for the second term. Newman argued that Genuardi’s was therefore responsible for paying all of the lost future rent for the second term, an amount that exceeded $10 million. The trial court invalidated the damages provision, hold- ing that it amounted to a penal liquidated damages pro- vision. The appellate court re- versed, sending the case back to the trial court to calculate the damages owed under the lease agreement. On remand, the trial court awarded New- man lost rent in excess of $10 million. On appeal the second time, Genuardi’s argued that the future rent should have been discounted to present value.
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Contact: Pamela M. Tobin • ptobin@kaplaw.com 910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-941-2543 • www.kaplaw. com Visit our Blog: www.philadelphiacommerciallitigationlawyerblog.com
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