April 16, 2008

Wooing Contract Conditions

You see it again and again in lawsuits over contracts. Almost everyone gets confused when its comes to conditions. The courts frequently mess up on the rules that apply to conditions. The lawyers often don’t realize the problems they are dealing with involve conditions. And the clients don’t even know what conditions are. The result is that some poor schmuck who has charged off suing the other side thinking he was given the shaft gets smacked down in court. The poor schmuck finds out that, because of the failure of a condition, the shaft was part of his deal all along.

A condition in a contract is simply something that has to happen before something else happens. Easy to say, but not so easy to apply. Conditions are imposed on one party’s obligation to perform under the contract. The contract might say, for example, that Andy Hardy does not have to buy Aunt Milly’s house until Andy Hardy first sells his existing home. If Andy Hardy cannot sell his existing home then the condition has failed and he is never obligated to actually fork over the money for Aunt Milly’s house.

Andy%2520Hardy-Lana%2520and%2520Mickey%2520Kissing.jpg But what if Andy Hardy does not really try very hard to sell his existing home because he’s too busy “pitching some woo” with Polly Benedict? Can Aunt Milly take Andy to court and complain that Andy’s out-of-control hormones kept him from making a decent effort to fulfill the condition? This gets us into conditions creating "implied promises" and the ever popular "excuse of conditions." Aunt Milly might have a good case here, if you can ignore the fact that Andy’s dad is Judge Hardy.

Conditions can be tricky because the contract may not make it clear exactly what is a condition. Time deadlines are often put in contracts but the deadlines are not always stated as being a condition to performance. The courts are no help in straightening the situation out because judges don’t really like conditions very much. The failure of a condition means the jackass on one side of the deal does not have to deliver on his promise. For some odd reason, this raises a judge’s hackles. So a judge can go to some lengths to say that the time deadline in the contract that every normal person would think is pretty darn important does not really mean much at all.

The sale contract says: “The closing deadline shall be April 1, 2008.” When Andy Hardy fails to show up at the title company on that date with his dough, Aunt Milly calls the deal off and makes a separate deal to sell her house to Beezy Anderson for more money. So Andy takes Aunt Milly to court to force her to sell the house to him. Not surprisingly, Judge Hardy sides with his boy Andy on the matter. The old judge (who might well have sat in contracts class with a young Charles Kingsfield) rules the closing deadline wasn’t a condition after all. It was more like an aspirational guideline. So it was okey-dokey for Andy to take a couple of extra weeks to get his cash together and wander into the title company with it. (Besides, Andy had to go to the doctor to get treatment for the social disease he caught along with Polly’s “woo.”)

Poor Aunt Milly’s lawyer is left outside the courthouse scratching his head as to what part of the word “deadline” the judge did not understand. But what the guy really needed in his appearance before the Honorable Old Fogey was a contract provision that said: “The closing deadline shall be April 1, 2008, time being of the essence. The parties’ obligations to close are expressly conditioned on the deadline being met.” (That last sentence is actually redundant, since "time being of the essence" is a phrase of art that means performance on time is an express condition. But you can't count on judges actually knowing this, since its not explained on red wine labels or anything else a judge is likely to actually read. So it does not hurt to use the lawyer's trick of saying the same thing over again in a different way. In fact, if I was writing the contract, I would be tempted to drive the point home by adding the line: “And judge, we really, really mean it.")

The law on contract conditions can get trickier still when you delve into the necromancy of “constructive conditions” and the accompanying two-headed beast of "substantial performance/material breach." The law here is filled with vague lists of "factors" that have to be considered, along with brain-numbing concepts. Its enough to make strong men and women of the Bar promise the Lord-High-Chancellor-of-Us-All that they will swear off “woo” forever if they can just get a clue about what the heck this legal mumbo-jumbo means. If you have the ill-fortune to stumble into this area, you might be able to figure out the nuances of the law after a good bit of study. But you are going to have a damned hard time getting old Judge Hardy to follow along, especially after he's had a glass or two of red wine.

April 5, 2008

A Called Shot

The Alaska Supreme Court yesterday ruled that two elders' benefit programs of an ANCSA Regional Corporation were valid. Atkinson, Conway & Gagnon handled the case for the winning side. The case is Bodkin v. Cook Inlet Region, Inc. The Court held that CIRI's elders' programs were authorized under Section 7(r) of ANCSA and that no constitutional challenges to the programs could be sustained.

The ruling gives me a chance to toot my own horn over a job well done in the appellate court because I wrote the brief and argued the case. BLAAAPPP! (Sorry. My horn is strained a bit from driving around with all the other knuckleheads out there this winter.)

babe%2Bruth.jpg The Court's decision was especially gratifying since I was already on record as saying the Court would rule this way. I spoke about the case at the November 2007 meeting of the Alaska Native Law Section of the Alaska Bar Association. I boldly predicted that the Alaska Supreme Court would affirm the lower court's decision and uphold CIRI's programs. I even made this prediction with the lawyer on the other side of the case, Fred Triem, sitting there, participating in the discussion. Yes, that's right my friends. Just like Babe Ruth and Joe Namath, I have successfully called my own shot.

[Since I've wandered into the sports area, I thought I would add a side note for the Dear and Esteemed Wife that, upon my passing, I think it would be great idea to have Dave Niehaus, the Hall of Fame announcer for the Seattle Mariners, make the "call" at my memorial service. Something like the following would be nice:

"The designated hitter, Grim Reaper, steps up to the plate now. Grim carries an astonishing, perfect 1.000 batting average, as his long uppercut swing eventually catches up to every pitch thrown his way. Here's Jerome's pitch now . . . and its BELTED deep towards center! Its going, going, going . . . The center fielder, Moe "Darn" Medicine, gives chase but he's not going to bring this one back . . . ITS OVER THE WALL, far, far out there in dead center field, straight above the 'eternity' sign! FLY AWAY! My, Oh, My!" (Wild cheering ensues.)

Just an idea, D.E.W. With any luck, you and Dave will have about three decades or so to work on it.]

Anyhow, the Bodkin case was really not difficult to predict. Fred Triem had made essentially the same arguments in a series of other cases filed in the federal and state courts over the years. He'd lost on every one, ever since Congress amended ANCSA to cut the Native Corporations some slack to honor their cultures. So it was no surprise the Alaska Supreme Court ruled the way it did in Bodkin, and my predicting the outcome was not much of an achievement.

I teased Fred at the Alaska Native Law Section meeting about running a "cottage industry" in these cases over elders' benefits. The decision in Bodkin should just about shut down Fred's little industry for good. Although you can never be 100% sure about these things, the door to Fred's "cottage" should be pretty well barricaded now and the windows shuttered, more or less nailed tight. BLAAAPPP! (Wild cheering ensues.)