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COVID-19 Update: Four (4) Contractual Provisions That Could Save You Thousands of Dollars

In these trying times of COVID-19, many of us are taking time to reflect upon the things that are most critical to our bottom line. Whether you are a provider of goods and/or services, adding the four (4) simple provisions below to your standard contract(s) could easily save you six figures in the event of a business dispute or litigation.

The best time to reduce litigation costs, or to prevent litigation entirely, is now – before the litigation starts. The following four (4) contractual provisions will help you do so:

1. A Limitation of Liability Provision. This provision can limit your company’s liability to a maximum of the fee already paid to your company by your customer for goods or services purchased, while also limiting the time within which your customer can assert such a claim. 

Liability limitations have become commonplace in commercial contracts, and are increasingly found in consumer contracts, as well. Indeed, many industries could not have thrived and survived without them. An example is the home and building inspection industry. One generally hires an inspection company to inspect a potential real estate purchase shortly after signing a purchase contract, and the purchase remains contingent upon a satisfactory inspection. Almost all inspection contracts now include a limitation of liability provision that limits the inspection company’s liability to the actual cost paid for the inspection. Without such a contractual limitation of liability provision, most of these inspection companies would have gone out of business long ago. 

To illustrate: an inspection company generally charges $1,000.00 to inspect a residential property. Without a contractual limitation of liability, if that inspection company failed to recognize a major home defect during that inspection, and the customer consequently purchased the property, but later discovered that the cost of repair for that undetected defect was $50,000.00, then the liability for the inspection company’s oversight would be the actual repair cost of $50,000.00 (or 50 times the cost of the inspection).  How long could a company survive under such circumstances?

A limitation of liability provision can: (a) legally exclude your liability for special, incidental or consequential damages, including, but not limited to loss of revenue, profits, or goodwill, use of capital or property, as well as damages for claims by third parties against your customer, and damages based upon tort, strict liability, or breach of warranty; and also (b) mandate that your customer must submit any claim(s), in writing, within a specific period of time (generally one year), or lose its claim entirely.

Not only can this provision save you significant sums of money in the event of a business dispute or litigation, but it can also quantify your maximum exposure, and give you some certainty as to when any valid claims will legally expire.

2. An Indemnification Provision. An indemnification provision obligates your customer to indemnify your company and hold it (and its officers, directors, agents, employees, contractors and subcontractors) harmless against any and all claims, causes of action, or attorneys’ fees that your company suffers as a result of your customer’s acts, operations, or contractual responsibilities.

This provision will protect your company against third party claims, and is also likely to dissuade your customer from suing you in the event that it is sued by a third party.

3. An Attorney Fee Shifting Provision. An attorney fee shifting provision provides that, in the event of a dispute, either (a) your customer pays your legal fees, or (b) the prevailing party in any litigation between you pays the other’s legal fees. Whether you end up with (a) or (b) will depend upon the strength of your bargaining position, and how carefully your customer reviews your terms and conditions. 

In either event, this provision tends to dissuade frivolous and unfounded litigation entirely, and can save you thousands of dollars if litigation is ultimately commenced.

4. A Provision for Interest Upon Non-Payment. This provision requires your customer to pay you interest on goods and services that are NOT paid for within a specified period of time. 

If you are forced to sue your client for non-payment, this provision will obligate your client to pay interest on the amount outstanding during the entire period of time in which a lawsuit is pending, or until the amount outstanding is paid. This is likely to prevent prolonged litigation by a customer, as its interest costs will continue to increase each day that the litigation continues.

While many states do statutorily provide pre-judgment interest for the prevailing party in breach of contract litigation, such pre-judgment interest rates are typically very low. By including this provision in your contract, and specifying a particular higher interest rate, you can substantially increase the interest that you will receive once you prevail or amicably resolve the matter (the maximum interest rate you may charge will generally be dictated by the market and/or capped by state usury laws).

As you have probably experienced, once a contract is signed, the parties rarely look at it again unless there is an issue. Including the above provisions in your standard contract, up front, will often deter litigation altogether when an issue arises. In the event that it doesn’t, it will certainly save you immense time, money, and aggravation.

I caution all of my clients that they need litigation about as much as they need COVID-19… but if you are forced into litigation against your will, you need contractual protections that will save you time and money, and are likely to resolve the litigation quickly. Although this may seem obvious, I continue to be shocked by the number of contracts that are sent to me, which fail to contain these, and many other, simple provisions that could save you tremendous amounts of time, money, and aggravation in the event of a business dispute or litigation.

While we are all sheltering in place, it is a great time to review your standard forms and contracts. If you would like me to review your current contracts to ensure that they include the above provisions (and a venue clause, which will keep any necessary litigation close to home, or in a legally favorable jurisdiction), please call or send me an email.

Of course, the enforceability of any of these provisions may be affected by the state and jurisdiction in which your company is located.

I look forward to hearing from you soon, and please, stay safe.

Michael Pomerantz, Founding Partner
Brown, Udell, Pomerantz & Delrahim, LTD.
Office: 312.475.9900 ext. 211
Mpomerantz@bupdlaw.com

Shelley Smith, Partner, BUPD Law attended the 2015 Chicago Chapter – American Institute of Architects (AIA) Annual Meeting and Holiday Party

Shelley Smith, Partner, BUPD Law attended the 2015 Chicago Chapter – American Institute of Architects (AIA) Annual Meeting and Holiday Party.

For Smith, this was an opportunity to pay homage to her past as her great-great grandfather Richard Upjohn was the founder and the first president of the American Institute of Architects. Richard Upjohn was a British-born American architect who emigrated to the United States and became most famous for his Gothic Revival churches and was partially responsible for launching the popular movement in the United States. He also did extensive work to help popularize Italianate style.

Shelley Smith is seen in the photograph with Zurich Esposito, Executive Vice President, Executive Vice President, The Chicago Chapter - AIA
Shelley Smith is seen in the photograph with Zurich Esposito, Executive Vice President, Executive Vice President, The Chicago Chapter – AIA

MICHAEL J. DELRAHIM, BROWN UDELL POMERANTZ & DELRAHIM, LTD’S MANAGING PARTNER SPEAKS — IGLOBAL FORUM’S 6TH REAL ESTATE MEZZANINE FINANCING SUMMIT IN NEW YORK CITY

Photo – iGlobal Forum’s 6th Real Estate Mezzanine Financing Summit in New York City panel on “How Hedge Funds Operate in the Mezzanine Space.” From left to right:  Michael Delrahim, Managing Partner, BROWN UDELL POMERANTZ & DELRAHIM; Daniel Jacobson, Commercial Real Estate Mezzanine Debt & Preferred Equity Investment & Origination, AEW CAPITAL MANAGEMENT; Mark Green, Head of CMBS Capital Markets, JEFFERIES LLC; Coley O’Brien, Director CRE/CMBS Investments, MKP CAPITAL; and Matt Cohen, Principal, MESA WEST CAPITAL

 

Michael Delrahim BUPD Law’s Managing Partner attended the iGlobal Forum’s 6th Real Estate Mezzanine Financing Summit in New York City last week where he moderated a panel discussion on How Hedge Funds Operate in the Mezzanine Space. The panelists had years of experience in commercial real estate financing and included:

  • Matt Cohen, Principal, MESA WEST CAPITAL
  • Mark Green, Head of CMBS Capital Markets, JEFFERIES LLC;
  • Daniel Jacobson, Commercial Real Estate Mezzanine Debt & Preferred Equity Investment & Origination, AEW CAPITAL MANAGEMENT;
  • Coley O’Brien, Director CRE/CMBS Investments, MKP CAPITAL

 

Delrahim set the stage for the discussion by taking the speakers and guests attending the seminar back through the last ten years of the financial and real estate markets. With today’s low interest rates and high liquidity in the marketplace, hedge funds have available to them alternative investments to equities or fixed-income instruments, the speakers said. Commercial real estate mezzanine debt, secured by a subordinated lien against, or a collateral assignment of the ownership interest in, commercial properties such offices, apartments, retail shops and hotels, has become a product that provides substantial dividends without nearly as much volatility as equities or junk bonds.

 

Historically, investing in mezzanine debt has been done by institutional investors, the panelists discussed (pension funds and sovereign wealth funds). However, money managers have launched real estate investment funds focusing on mezzanine financing alongside senior loans. Nearly $1.7 trillion worth of commercial mortgages will mature between 2015 and 2019, which will create even more opportunities in the market. There are now different products to sell and others areas to finance, including abroad and corporately. Higher yielding mezzanine debt in a stable market is a lower investment risk than it was in the bubble of 2007, and banks and mezzanine lenders have been more conservative than in recent years. While all the panelists and Delrahim seemed quite bullish on the market and the commercial real estate industry, the one big question was not if, but when, interest rates increase, how would that effect mezzanine positions and the risk profile of a mezzanine loan investment.

 

The iGlobal Forum was attending by nearly 175 senior real estate and hedge fund professionals.

Rasha Gad, BUPD Law Partner and Chair of the Middle East Practice will speak at the upcoming Thomson Women’s Transformative Leadership

Rasha Gad, BUPD Law Partner and Chair of the Middle East Practice will speak at the upcoming Thomson  Women’s Transformative Leadership: Empowerment by Improving Participation & Representation.  This special sold-out one-day summit will be held in New York City on March 3, 2015 and will coincide with International Women’s Day on March 8, 2015. 
 
Ms. Gad will participate as a panelist on a program titled “Cutthroat or Kindness: Treatment of Rising Stars.”
 
This seminal event will address the various challenges affecting female leadership opportunities in some of the world’s largest organizations and offers a blend of keynote plenaries and focused roundtables that showcase some of the most powerful women in law, business, government, and academia, as they ponder how to accelerate and transform the path to leadership through a series of practical, timely conversations.

Click here for more information on the event

**BUPD LAW ANNOUNCES FOUR PARTNERSHIP PROMOTIONS**

Chicago, IL December 17, 2014 – The law firm of Brown, Udell, Pomerantz & Delrahim Ltd (BUPD Law) is proud to announce that effective on January 1, 2015 Rasha Elganzouri Gad, Bryan King, Gary Saipe, and Shelley Smith will be promoted to partners with the firm.  The four were formerly Counsel with the Firm and will continue their practices in the areas of real estate and commercial litigation.  Prior to joining BUPD Law each of the four new partners spent many years with some of the country’s largest and most prestigious global law firms.

“BUPD Law is proud to welcome Rasha Elganzouri Gad, Bryan King, Gary Scott Saipe, and Shelley Smith to the partnership ranks as these four talented lawyers exemplify the service delivery, hard-work and dedication that our clients expect from BUPD Law,” said managing partner Michael Delrahim.  “We believe that these moves in combination with recent infrastructure improvements further our ability and commitment to provide quality and responsive legal services to clients,” said Delrahim.

Rasha-Gad

Rasha Elganzouri Gad practices in the areas of general corporate and complex commercial real estate transactions.  She serves as chair of the firm’s Middle East Practice.  Her work includes acquisitions and dispositions, financing, construction, joint venture formation, development, leasing, hotel management and operation, structuring of entities for investment, cross border commercial transactions and workouts and restr

ucturing.  Prior to joining the firm, she was Of Counsel to the global law firm of DLA Piper LLP and Wilmer, Cutler, Pickering Hale & Dorr in Washington DC.  She was also a Senior Associate at Patton Boggs in Dubai, UAE, and In-House Counsel for one of Dubai’s largest real estate developers. Rasha also worked for Trowers & Hamlins in Egypt where she gained significant experience in the Egyptian legal market, especially in the area of real estate commercial transactions and PPP projects.  At Trowers & Hamlins, she was Chair of the Cairo Real Estate practice and advised a diverse clientele of local and multinational companies on commercial real estate matters.  Rasha also worked at Shalakany Law Offices in the Hospitality and Tourism practice.  Rasha served as a frequent speaker at Middle East industry events including GRI MENA, Global Trade Matters, and Euromoney.

She received a joint JD/MBA degree with honors from Chicago Kent College of Law in 1993. She was awarded a BA degree magna cum laude from Saint Mary’s College, Notre Dame in 1993 in Political Science with minors in Business and History.  Rasha is fluent in Arabic.   Ms. Gad is 43 and resides in Chicago, Illinois.

 

Bryan King

Bryan King is a seasoned trial lawyer who has represented clients in a wide range of complex commercial and securities litigation matters.  He serves as the Chair of BUPD Law’s Litigation Department.  His practice includes contract and licensing disputes, securities and common law fraud, bankruptcy litigation, trade secret claims, fiduciary duty litigation, and other business torts. He also has experience representing broker dealers and investment advisors in arbitration before NASD/FINRA. Bryan has represented clients from various industries, including financial services, venture capital, high tech manufacturing, alcoholic beverage, software and internet, and real estate.  Mr. King began his career at Wilson, Sonsini, Goodrich & Rosati in Palo Alto, California. After moving to Chicago, he worked at Jenner & Block, where he became a partner in 2007. Mr. King graduated from Stanford University in 1995 with degrees in psychology and economics. He obtained his J.D. degree from Columbia University School of Law in 1998, where he was editor-in-chief of the Columbia Journal of Environmental Law and a Harlan Fiske Stone Scholar.  Mr. King is 41 and resides in Lincolnshire, Illinois.

 

Gary Saipe

Gary Scott Saipe has over thirty-five years of transactional real estate experience.  His practice includes the representation of banks, savings and loan associations, insurance companies and other lenders with respect to construction loans and permanent loans involving high-rise and single-family residential developments, shopping centers, hotels, office buildings, apartments buildings, nursing homes and multi-state retail sites, and the representation of developers in connection with single-family and multi-family residential developments (including numerous condominium developments, both new construction and conversions) and commercial shopping centers. Mr. Saipe also has substantial experience representing borrowers and institutional lenders in connection with work-outs of problem loans.   He was awarded a Juris Doctorate degree from Northwestern University School of Law, where he was the Article Editor of The Journal of Criminal Law and Criminology and an instructor of the first-year writing course.  He received a B.S. degree in psychology with High Honors from the University of Illinois in Champaign, Illinois.  Mr. Saipe is 66 and resides in Libertyville, Illinois.

 

Shelley Smith

Shelley Smith is an experienced litigator who has tried cases in state and federal courts across the country in a broad range of business and commercial matters. Her experience includes civil and criminal antitrust actions, construction defect and other real estate litigation, fiduciary duty cases, securities fraud, breach of contract disputes, bankruptcy proceedings, and patent and trademark infringement litigation.

Ms. Smith has worked with clients in a variety of industries including real estate, financial services, and manufacturing. After law school, she joined Sullivan & Cromwell, in New York, and later joined Jenner & Block in Chicago, where she became an equity partner in 1996. Ms. Smith received her Juris Doctorate degree from Columbia University School of Law in 1988, where she was a Harlan Fiske Stone scholar and the Managing Editor of the Columbia Journal of Law and Social Problems.  She was awarded a Bachelor of Arts degree in Humanities in 1984, summa cum laude from the State University of New York at Stony Brook, where she graduated as valedictorian and as a member of Phi Beta Kappa.  Ms. Smith is 53 and resides in Oak Park, Illinois.

 

About BUPD LAW

Brown, Udell, Pomerantz & Delrahim Ltd. (www.BUPDLaw.com) is a general commercial law firm representing business owners, developers, lenders and individuals in complex real estate, corporate and commercial litigation matters.  The firm is a zealous client advocate and strives to provide clients with responsive high-quality legal services on a cost effective basis. BUPD Law was founded in 1978, and today has 23 lawyers with offices in Lincoln Park. The firm is led by managing partner Michael J. Delrahim.  BUPD Law lawyers work on a team basis within a flexible and efficient infrastructure.  Visit: www.BUPDLaw.com for more information.

For more information or to arrange an interview with Michael Delrahim contact Jan Anne Dubin, Marketing and Communications Consultant at 312.399.3116 or jan@janannedubinconsulting.com.

BUPD LAW ADDS MARC I. FENTON AS SENIOR COUNSEL WITH SIGNIFICANT CORPORATE RESTRUCTURING, LIQUIDATION, AND REAL ESTATE WORKOUT EXPERIENCE

Chicago, IL December 15, 2014

The law firm of Brown, Udell, Pomerantz & Delrahim Ltd (BUPD Law) announces that Marc I. Fenton will join BUPD Law as Senior Counsel. He will continue his practice in the areas of corporate restructurings, liquidations and real estate workouts. Mr. Fenton was formerly a Partner in the Chicago office of the Ohio law firm of Statman Harris & Eyrich LLP. Prior to that, he was Senior Counsel with Neal, Gerber & Eisenberg LLP; Of Counsel with DLA Piper US LLP; and a First Vice President and Legal Counsel in the Bank One legal department (now JP Morgan Chase.)
BUPD Law is delighted to have Marc Fenton join the firm,” said managing partner Michael Delrahim. “As lender’s counsel, Marc brings a wealth of bankruptcy, corporate restructuring and real estate workout experience to the firm. His deep knowledge of financial institutions coupled with real estate and corporate transactional experience will be of tremendous value to our clients and the Firm,” said Delrahim.
Mr. Fenton has significant experience representing lenders and debtors in reorganization cases, workouts, turnarounds and bankruptcy proceedings. He handles all aspects of Chapter 11 cases including pre-bankruptcy planning, negotiating and drafting first day motions, negotiating and confirming plans of reorganization. He has also been responsible for post-confirmation matters such as claims resolution, prosecution or defense of avoidance action and other adversary litigation.
Mr. Fenton’s experience also includes real estate workouts and out of court restructurings. He has successfully represented parties seeking to purchase or sell assets through bankruptcy or other out of court proceedings. Mr. Fenton has represented various creditors’ committees, assignees in assignments for the benefit of creditors and bankruptcy trustees.
Mr. Fenton has extensive experience representing public and privately held middle-market and Fortune 500 companies, financial institutions, insurance companies, retailers, real estate developers, and manufacturers in bankruptcy cases throughout the country. Recent Chapter 11 cases in which he has been engaged to represent either the Debtor or Committee include: Hartmarx, Wickes, Inc. and Jays Foods LLC. Recent engagements on behalf of lending clients include Evans Oil Company, LLC and R & M Aviation, Inc.

A former Member of the Editorial Advisory Board for “Bankruptcy Law360, Mr. Fenton also is the author of a chapter entitled “Equitable Remedies” in the 2009 edition of the Illinois Institute for Continuing Legal Education (“IICLE”) publication titled Creditors’ Rights in Illinois.

Mr. Fenton is a member of the Board of Trustees, Vernon Area Public Library District and served on the
Make a Wish Illinois, Corporate Contributions Committee from 2009-2012. He received his Juris Doctorate degree from Northern Illinois University, College of Law. In 1975, he was awarded a Bachelor of Arts degree in Political Science from Loyola University of Chicago.
Mr. Fenton was admitted to practice law in Illinois in 1981. He has appeared in bankruptcy courts throughout the country. He is admitted to practice before the U.S. District Court for the Northern District of Illinois where he is a member of the Federal Trial Bar. He is also admitted to practice before the U.S. Court of Appeals for the Seventh Circuit. Mr. Fenton is a member of the American Bankruptcy Institute.
Mr. Fenton is 61 and resides in Buffalo Grove, Illinois.

About BUPD LAW
Brown, Udell, Pomerantz & Delrahim Ltd. (www.BUPDLaw.com) is a general commercial law firm representing business owners, developers, lenders and individuals in complex real estate, corporate and commercial litigation matters. The firm is a zealous client advocate and strives to provide clients with responsive high-quality legal services on a cost effective basis. BUPD Law was founded in 1978, and today has 23 lawyers with offices in Lincoln Park. The firm is led by managing partner Michael J. Delrahim. BUPD Law lawyers work on a team basis within a flexible and efficient infrastructure. Visit: www.BUPDLaw.com for more information.
For more information or to arrange an interview with Marc Fenton please contact Jan Anne Dubin, Marketing and Communications Consultant at 312.399.3116 or jan@janannedubinconsulting.com.