Unwinding Intertwining Deadlines And Responsibilities – Avoiding The Gordian Knot Syndrome

knot 3

How many times have you pulled a form contract or lease together to make sure that the deal gets done, and in the process not looked at the particulars of how all of the deadlines and responsibilities fit together? Probably more than once!

Although it’s always important to focus on the substance of the transaction, deadlines and interconnected duties and responsibilities truly matter in the long run. Yes, it may be tedious and it may cause deviations from the form document you’re using, but it can be incredibly important to get these items clear and right.  With the economy coming back, the premium is set on getting all documents finalized and in order as quick as possible. However, if negotiations result in conflicting deadlines for different obligations under the terms of a contract or lease, danger lurks ahead.

Here are a few examples:

  1. Lease commencement and rent commencement beginning with the delivery of the premises by the landlord.   Most lease commencement dates begin either at the date of signing of the document or another set by the parties.  However, rent commencement can be another issue altogether. Most tenants will not agree to pay rent until they have a premises delivered to them with all of landlord’s upfits complete and approved and permitted. If the rent commencement keys off of some other date, this can be an issue.
  1. What about TICAM reporting deadlines and the corresponding deadlines for the tenant’s response and request for any auditing of landlords records?   If the reconciliation date is set to early, landlords may end up in breach by not reporting this information within the time provided in the document. Correspondingly, even if it is reported within the time allowed by the agreement, if the tenant’s response, objection and/or request for audit does not come within a timely fashion as envisioned by the form, does their remedy disappear?
  1. Most purchase and sale contracts set a firm date for due diligence for the purchaser. However, there are often corresponding dates that the purchaser has to provide evidence or proof of loan approval, as well as government approvals and permits. Do these lineup?
  1. What if the contracting parties agree on a deadline or limit on a guarantors responsibility for a contract or lease? Is it clear that the responsibility will end on a date certain or will it continue to accrue for a certain amount of time during the term of the contract or lease?

Solid negotiating and good drafting can solve all of the above, but it takes time and effort. One may question the necessity of spending time on such details. However, imagine that amount of time compared to resulting disputes and litigation over interpretations of conflicting or contradictory terms. Most of the time, the difference is minimal on the front end compared to the time spent on sorting, unraveling, unknotting and otherwise working out these conundrums.

Why spend the time on all of this? After all reasonable people in reasonable business transactions can certainly agree to results in a expeditious time.

Not.

Unfortunately, failure to coordinate time deadlines or responsibilities under the terms of a contract or lease often result in hours and hours of time spent negotiating and/or disputing the rights and meaning of certain clauses.  If it is unclear to the contracting parties at the time they signed the agreement, it will certainly be confusing to any third parties that may have to examine the agreement at a later, not to mention the time and money needed to resolves the issues.

A key point: if a clause or deadline description doesn’t make sense to you, it’s highly likely it will never make sense to anyone later. Better to spend the time early on working out the language that will allow the parties to read and interpret the agreement in a clear fashion rather than to find later that they are in an expensive and time-consuming dispute over something that could’ve been hammered out months or years before!

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