Commercial Real Estate Contracts - Avoiding Vague Terms of Agreement
What Are the Consequences of Vague Terms in My Contract?
Vague terms in a commercial real estate contract can lead to a variety of legal issues. For example, if a lease agreement states that the tenant is responsible for "reasonable maintenance" of the property, this could lead to disagreements about what constitutes "reasonable" maintenance. Does it include major repairs, or just minor upkeep? To avoid such confusion, it's advisable to clearly define what maintenance tasks the tenant is responsible for, perhaps even providing a detailed list.
Here's another example: if a contract states that a tenant may only use the property for "business purposes," this could lead to disputes about what activities are considered "business purposes."
In Pennsylvania, if a contract term is ambiguous, courts may interpret the term against the party who drafted the contract. This is known as the "contra proferentem" rule. Therefore, if you're drafting a commercial real estate contract, it's in your best interest to ensure that all terms are as clear and specific as possible.
Can I Use Standardized Contracts to Avoid Vague Terms?
Standardized contract provisions, also known as boilerplate provisions, can be a useful tool in commercial real estate transactions. These provisions may contain customary terms and conditions that have been carefully drafted to be clear and unambiguous. However, while standardized provisions can help you avoid vague terms, they are not a one-size-fits-all solution. Every commercial real estate transaction is unique, and a boilerplate provision may not fully address your specific needs or circumstances. Even if you're using a contract with boilerplate provisions or which is described to you as “standard”, it's still advisable to have it reviewed by an experienced commercial real estate lawyer. They can ensure that the contract adequately addresses your specific needs or circumstances, protects your interests and complies with Pennsylvania law.
What If I Already Signed a Contract with Vague Terms?
If you've already signed a commercial real estate contract with vague terms, don't panic. There are still steps you can take to protect your interests. First, consult with an experienced commercial real estate lawyer. Second, document all communications related to the contract. This can provide valuable evidence if a dispute arises over the interpretation of a vague term. Pennsylvania law implies a duty of good faith and fair dealing in every contract. Even if a term is vague, you should strive to interpret and apply it in a fair and reasonable manner.
What Other Legal Concepts Should I Be Aware of When Drafting My Contract?
In addition to avoiding vague terms, there are several other legal concepts you should be aware of when drafting a commercial real estate contract. One such concept is the "parol evidence rule." This rule states that if a contract is clear and complete, outside evidence (like oral agreements, messages, discussions, or prior drafts) cannot be used to change or contradict the contract's terms. It's crucial to ensure that all important terms are included in the written contract. Another important concept is the "duty of good faith and fair dealing." In Pennsylvania, contracts include an implied duty of good faith and fair dealing. This means that even if a contract term clearly provides one party with a right, that party must exercise that right in good faith and in a way that does not unfairly disadvantage the other party.
What If the Other Party Insists on Vague Terms?
If the other party insists on including vague terms in the contract, it's important to proceed with caution. Remember, vague terms can lead to legal disputes and may be interpreted against you if you're the one drafting the contract. In such situations, an experienced commercial real estate lawyer can be invaluable. They can negotiate on your behalf, pushing for clearer terms, advocating your rights, and protecting your interests. They can also help you understand the potential risks associated with the vague terms and advise you on the best course of action.
How Can I Ensure That Rent and Lease Terms Are Clearly Defined?
Rent and lease terms are another area where clarity is crucial in a commercial real estate contract. These terms should clearly define the amount of rent, when it is due, how and where it should be paid, notice and cure period, and any penalties for late payment. The lease term should specify the start and end dates of the lease, any options for renewal, and the conditions under which the lease can be terminated. In Pennsylvania, if rent and lease terms are vague or ambiguous, this could lead to disputes about payment obligations or the duration of the lease. An experienced commercial real estate lawyer can help you draft clear, specific rent and lease terms that protect your interests and comply with Pennsylvania law.
How Can an Experienced Lawyer Help Me Avoid Vague Terms?
An experienced commercial real estate lawyer can review your contract, identify any potentially ambiguous terms, and suggest clearer language. Let's say you're leasing a commercial property and the contract states that you're responsible for "all necessary repairs." An experienced lawyer might suggest specifying what types of repairs you're responsible for, or defining what constitutes a "necessary" repair. A lawyer can also help you understand how Pennsylvania courts have interpreted such terms in the past, helping you anticipate potential issues and address them proactively.
Avoiding vague terms in your commercial real estate contract is crucial to preventing legal disputes. An experienced lawyer can help you draft a clear, comprehensive contract that protects your interests. If you're dealing with a commercial real estate contract, call LareDiaz Law today at 215-774-5159 for a no-charge consultation!
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Eric Diaz
Founder and Managing Partner
diaz@larediaz.law