News & Noteworthy

Authored - NJ Contract Law Update - How to Avoid an Ambiguity
AUGUST 21, 2012 | Windels Marx - Commercial Litigation

In Garrison Lifestyle Flemington, LLC v. The Talbots, Inc., 2012 N.J.Super.Unpub. LEXIS 1827 (N.J. Law Div. July 26, 2012), the Court found an ambiguity in the face of certain drafting imprecisions. Considering those imprecisions for didactic purposes may be of guidance to the draftsperson in the first instance, and to the litigator in the final instance.

In lay terms, the question in Garrison was whether the mall in question was sufficiently occupied to require payment of increased rent by Talbots, which had elected to open its leased space before the mall was reasonably full. The controversy revolved around the phrase "Gross Leasable Floor Area"; and whether that phrase included "an unconstructed cluster of stores...depicted in the site plan". The landlord claimed that a completely "unconstructed area" should be excluded, meaning that the mall was very full ("89%, well over [the] 70% [required]". The tenant claimed that because the intent of the clause was to increase Talbots rent only with a very full mall--which would benefit Talbots, likely a mall anchor--all space should be included, encompassing areas the landlord had not yet developed.

The Court found an ambiguity based on the following instructive factors:

  1. The term "gross leasable area" was not defined in the lease agreement (Lease), although other terms were.
  2. The site plan attached to the Lease (and obviously intended to be part of the understanding) seems to have encompassed the unconstructed areas.
  3. Although the site plans showed a full complement of future stores, the Lease's terms seemed to contradict the depiction on the site plan; where the term "leasable area" in the agreement's terms "refer[red] to 90,000 feet of actual constructed space".
  4. The presence of Lease clauses acknowledging the importance to Talbot's of full "co-tenancy" (occupancy) of the mall.
  5. The goal or purpose of the co-tenancy clause to increase "total foot traffic in the Center" for the benefit of the tenant (Talbot's), so as to justify a higher rent.
  6. The fact that space can be leased even if completely undeveloped at the time of leasing.
  7. Different terminology was utilized in two paragraphs that were ostensibly related but involved distinct time-frames: (a) "leasable area" as to a commencement date, and (b) "Gross Leasable Floor Area", applicable to the later time-frame.

The lesson to be learned from Garrison is to be crystal-clear in draftsmanship, particularly on key points such as the following:

  1. Be careful to clearly define all terms. More specifically, capitalize all terms so that the court (and the parties) will recognize exactly what you are referring to; define those terms; and use them consistently throughout the agreement.
  2. When using two-similar sounding terms, make sure each one is separately (a) defined, to draw attention to the fact that the terms are different; and (b) abbreviated, to help the text flow more smoothly. Through abbreviations, the distinction between the terms is emphasized. For example, in Garrison, "Gross Leasable Floor Area" could have been defined as "GLFA"; to be distinguished from "gross leasable area" (better defined with initial capital letters), subject to an abbreviation such as "GLA" (by contrast with "GLFA"). Consistent use of these differential terms would assist the court in discerning the parties' intent.
  3. When attaching an Exhibit such as a site plan, be extremely clear in the text as to the significance to be afforded that document; and if so intended, the fact that it has significance with respect to only certain sections of the agreement (and "no others", one could say, if that is the intent).
  4. Give specific illustrative examples in the lease whenever possible, in mathematical terms.
  5. At times, it pays to have a separate expression of intent, independent of operative terms--perhaps as a Recital expressly incorporated into the agreement--to guide the court in the event of any text it may find murky. One can easily imagine what that expression of intent would have been in Garrison--and it may well have saved an expensive lawsuit.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

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