A Whirlwind Introduction to Our New Series on Business Contracts
The coronavirus pandemic has transformed the year 2020 in extraordinary ways, with consequences that have yet to be fully understood. Some of the impact of the virus is clear: its affliction of our elderly and vulnerable populations and the economic devastation left in its wake. However, in several important respects, the influence of this contagion will go unrecognized until a later time, when a needed perspective is available.
For countless people and businesses, this painful period in our history cannot end soon enough. The urgency in resuming a sense of “normalcy,” to return to the familiar, is palpable and overwhelming.
Now more than ever, we urge our business friends and clients to take this time to reflect on how commercial activities were conducted before the pandemic in the hope of changing the way you effectively conduct business going forward, with the purpose of mitigating or at least reducing your legal risk of exposure.
For many, reliance on standardized documents, or templates, in conducting business is usual and customary. Often, these legal instrumentals have been in place for years, and are familiar. However, legal documents should not be perceived as static and unchanging, but evolving and adaptable to a changing environment. Just as we are challenged to adjust our ways of doing business to account for the pandemic, so too we must reevaluate the efficacy of our business documents to confirm their continued usefulness.
Admittedly, it is hard to critically assess these documents and engage attorneys to ruthlessly edit their clauses, particularly when money is tight. With apologies to Rabbi Jonathan Sacks, however, “sometimes we have to give up our past in order to acquire a future.”
We do this in order to reconcile these legal documents to trends in the law and to respond to case law decisions. To eliminate ambiguities, better delineate duties and responsibilities among the parties, and hinder plaintiff’s attorneys in their prosecution of litigation.
Our law firm has earned a deserved reputation in representing insurance carriers and their insureds in defense of claims. Nevertheless, we have seen too frequently that a defense may be compromised by poorly worded commercial documents. Oftentimes, the difference in litigation outcome boils down to a single word or an inartful phrase.
Two simple examples. Building owners and general contractors frequently face personal injury claims where an individual alleges to have suffered injuries after slipping and falling on a sidewalk. Ambiguities in commercial leases in assigning responsibility for the maintenance of sidewalks can make personal injury lawsuits difficult to defend. The problem arises even if the lease provides that the premises have to be held in good repair. In New York City, abutting landowners are responsible for the sidewalks and in some, but not all, Long Island towns. In a recent Court of Appeals personal injury case that will affect New York City property owners, the Court held that “out of possession” landlords can be held liable for accidents arising from failure to properly maintain sidewalks abutting their properties. Previously, out of possession landlords were able to contract that away. Tenants can now appear to sue them directly despite the terms of the lease.
As a second example, construction contracts may have inadequacies concerning risk transfer where the legal danger is that the error of entering into the ineffective agreement is not known until it is too late. Many times, owners and general contractors (or their agents) enter into verbal agreements or basic time and material agreements, which do not require that the owner and general contractor be indemnified or named as additional insureds. Unfortunately, once an accident occurs and suit is commenced, those owners and general contractors are usually left “holding the bag” as they cannot effectively pass the risk on to those entities responsible for the loss. They end up having to defend themselves in the suit and are likely to be held statutorily liable.
These two examples are illustrative of the need to continually re-evaluate basic contracts in the context of experience and case law decisions. Our goal at Hurwitz & Fine, PC in commencing this series is to educate you, our business friends and colleagues, on some of these business and legal risks so that timely remedial action or measures may be taken to restate and amend your governing legal documents. Doing so can not only prevent litigation, but if litigation should arise, it can deliver a more effective legal defense.
Hurwitz & Fine, through its attorneys in both the corporate and litigation practice areas, continues to monitor case law developments that may affect the quality of your litigation defense and the effectiveness of your business contracts. Please contact any of the following attorneys for guidance on these and other concerns:
Lawrence M. Ross (Buffalo) – [email protected]