B. Lane Hassler, P.C. attorney at law in Chicago and New York

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Chicago Office
1016 West Jackson
Suite #100
Chicago, IL 60607
Tel: 312-893-0551

New York Office
80 Broad Street
Fifth Floor
New York, NY 10004
Tel: 877-394-2185

lanehasler@blhpc.com


BLHPC NEWS ARCHIVE - 2016



VIEW B. LANE HASLER, P.C. CURRENT LEGAL NEWS - 2017

DECEMBER 2016

Avoiding Problems by Consulting an Attorney

In December a project ended without litigation. This seemingly unremarkable outcome was anything but, given the facts. It illustrates why hiring an attorney can actually avoid a larger legal dispute.

A homeowner contracted for renovations to his home, but did not hire an attorney to review the contract. During the project, more than the usual issues arose, including the wrong materials being used, the occurrence of damage to the floors, doors and cabinets, and the work went significantly past the scheduled completion date. The homeowner attempted to resolve the issues with the contractor then. When the contractor was unresponsive, he negotiated directly with the subcontractors. This uncovered the contractor's failure to timely pay the subcontractors. This triggered threats by both the contractor and the subcontractor to file mechanics liens on the home.

The homeowner called me with what, at first review, seemed to be a case headed for a multiple lien litigation with associated breaches of contract claims.

The homeowner, as is not uncommon, had incomplete records and the construction contract was the contractor's in-house form which lacked most of the common elements of a proper form, such as would have been present in the AIA construction form. Therefore, my first step was to gather all information from both the homeowner and public sources. This process revealed that the homeowner had not obtained the proper partial lien waivers from the contractor when making interim payments. This of course, made the situation worse for the homeowner. But the information also revealed that the contractor and subcontractors had not been working on the job for a significant period of time. Apparently, the work was close enough to completion that the homeowner took it over and used other trades to finish. Thus, the deadline for filing a lien was approaching both for the subcontractors to have a lien at all and for the contractor to have a lien with priority over existing liens. Once this deadline passed, the homeowner's leverage in working out a solution would increase significantly.

However, the threat of imminent lien filings was a great concern since the contractor and subcontractor told the homeowner they were going to file them. Therefore, my next step was to reach out to the contractor in a neutral fashion introducing myself and asking for his side of the story. The highly offensive and uninformative response told me that there would be no negotiations with this contractor. So the next communications were neutral and provided information to "talk him off the ledge" while laying the groundwork for a slander of title claim if the contractor filed a lien since the facts, as I had them, did not show that there were grounds for a lien.

At the same time, I reached out to the two subcontractors who were threatening a lien and again. In a neutral fashion, asked for information and suggested a resolution since the homeowner was willing to use the balance due the contractor to directly pay the subcontractors. The subcontractors expressed interest, but failed to provide the required supporting documents.

The lien deadline then passed.

The homeowner's goal of not having liens filed on his home has so far been achieved. Now, the project has a totally different approach. I am "on hold". I am ready to address any late-filed liens. The homeowner has so far avoided litigation - and learned a lesson for any future renovations. That lesson is to have an attorney review the contract before signing and to obtain proper lien waivers before paying.

NOVEMBER 2016

A Bad Builder and a Naive Homeowner - Lessons Learned

In November I settled a case. Ordinarily that should be a good thing, but this one didn't feel right.

This month's news is devoted to waiving a red flag to all homeowners who are about to buy a house or undertake renovations or repairs. The lessons from my recent case can save you tens of thousands of dollars and a great deal of angst.

A Terrible and Preventable Experience

My clients were the buyers of a new semi-custom home from what seemed to be an established small builder. They were represented in the purchase by an attorney whose practice focused on routine real estate closings. As a result, they ended up stuck with a terrible purchase contract and an even worse "warranty" drafted by the builder's attorney.

They closed on the house and paid the full purchase price before it was completed and moved in with a punchlist of items that required completion. This was a critical mistake. The builder, having received all of its money, gave every excuse to avoid doing the punchlist work or repair a rapidly growing list of newly-discovered construction errors that typically are covered by a warranty.

At their wits end, the homeowners retained me.

My initial approach was to have the homeowners send a non-threatening reminder letter to the builder, followed by a more pointed demand letter and finally a "this goes to the lawyers" letter. This usually gets the attention of a busy builder and results in the completion of a project. This builder, however, was not moved because as we later discovered, it never intended to do the remaining work.

My next step was to attempt to negotiate with the builder's attorney to impress upon him the reality of the homeowner's claims and reach an agreement either for the builder to do the work or pay for someone else to do it. A negotiated agreement is almost always better than a litigation not just because it gets the results quicker, but it is significantly cheaper and less stressful. This didn't work here either. The builder's corporate and litigation attorneys (different solo practioners) were uncooperative, personally nasty and acted on the edge of ethical behavior. It is true that clients tend to hire lawyers that mirror themselves.

So litigation was the only option. The builder's attorney did everything possible to delay and drive up costs. First, he let the deadline to answer the complaint pass which required me to file a motion for default. Then he asked for and received an extension of time to answer. This resulted in a four month delay. Then on the answer deadline, he filed a frivolous motion to compel arbitration which took four more months to defeat. Next, instead of just answering the complaint, he filed a combined answer and motion to strike portions of the complaint. This took another four months to defeat. So a year went by, the case did not even have a trial date, and the homeowners had incurred significant legal fees.

A side note - the Cook County Circuit Court is located in the Daley Center which is also referred to as the "Delay" Center for a reason, nothing happens fast in Cook County Circuit Court and most judges refuse to enforce the rules. In this case, the Court let the builder violate the deadlines for filing an answer, for answering discovery and for appearing at many of the motion hearings. I obtained orders against the builder that were later vacated because the builder said, in essence, "sorry, I forgot to do that". This failure by the court is a major factor as to why litigation is time-consuming and expensive.

The Court suggested that the parties discuss settlement. The builder's offer was an arbitrary number so insultingly low that it didn't even cover the homeowner's legal bills. The homeowners countered with an offer that listed the claims in the complaint and put a dollar figure on them and then discounted the future litigation costs and risks of recovering. This offer, of course, was dismissed by the builder. So back to litigation.

Discovery in litigation is expensive, particularly when there are lots of witnesses and an uncooperative opposing party. In this case I had to take the depositions of the three partners in the builder, the painter, the flooring subcontractor, the drafter of the plans, and the carpenter. Because the builder used immigrants, I had to conduct two of the depositions using an interpreter. The court reporter costs alone were significant. The builder's attorney did everything possible to make discovery difficult. The depositions were disrupted, few documents were produced and not timely, and answers to written questions were incomplete or met with frivolous objections. This required me to file several motions to compel discovery.

At the close of discovery, it was obvious to the builder that the homeowners had uncovered significant issues with the work on this project, but also with the builder's business practices. I issued discovery to the builder's bank and shortly thereafter received a renewed request from the builder's attorney for a settlement conference. This time the builder's offer, while low, was at least to a point where it could be negotiated. The builder's attorney, however, refused to engage in principled negotiation, rather he just wanted to "ballpark it" and threw out arbitrary round numbers. In the end, I presented the homeowners with an analysis of the builder's "last" offer and compared it to the high, probable and low range of results if the matter were to go through a trial and collection of a judgment against the builder. The offer was at the very bottom of the low range. My clients accepted, not because it was a good settlement, but because it was time for them to move on. So money changed hands and the case was dismissed.

Why do I say this settlement didn't feel right? Because justice was not served. This builder is still out there probably doing the same things to other naive homeowners. The terrible litigation tactics of the builder's attorneys - which the Court allowed - were rewarded which means these attorneys are presumably doing the same nasty things in other cases.

What Can You Learn From This Experience?

What can you, a potential home-buyer or a homeowner contemplating renovation or repair, learn from this experience?

First: spend the money on a competent attorney up-front to represent you in documenting your contract with the builder/contractor. Realize that the builder/contractor does this for a living - you do not. Realize that the builder/contractor is not your friend –they can be friendly - but their interest is in doing the least amount of work for the most amount of money. The only way to protect yourself is to hire a competent attorney and not one who only does $500 routine real estate closings. A good contract requires an experienced attorney willing to tell you what is objectionable in the contract and the relative risk so you can make an informed decision whether to proceed. I do these for a flat fee. If a good contract can't be done for a flat fee then there is a bigger problem - the builder/contractor is being unreasonable at the outset so this is a sign of things to come. I know you want to buy this house or build that addition or do that repair, but far better that I tell you not to do it with this builder/contractor than to end up in litigation over improper and incomplete work. There are plenty of good honest builder/contractors out there.

Second: research the builder/contractor. In the Internet age, there is no excuse for not knowing about the builder/contractor. In the case I described above, the builder had been sued before for basically the same problems. I pulled the case file and it was a mirror of my case - the same delay tactics, the same nasty attorneys and a settlement at the end. But don't just rely on the internet, call references. And not the ones the builder/contractor gives you. Get a list of the last five permits pulled by the builder/contractor, look up the owner of the property, and call them. I know it is hard for some people to make such a cold call, but it has to be done in order to avoid a bad builder/contractor. Simply ask two questions - did the builder/contractor do the work to your expectations and did they timely respond to your telephone calls, texts and emails.

Third: never get in the position where the builder/contractor has all of your money before finishing the work. This is common sense, but contractors try to get full payment upon "substantial completion" which is definitely not full completion and certainly does not cover warranty work.

Fourth: beware of warranty forms written by the builder/contractor. I have never seen a warranty form that added protections for the homeowner, rather these forms exist to limit the liability of the builder/contractor. Never sign one without having it reviewed by a competent attorney. If the builder/contractor says "it's my standard form and I don't change it" then it is time to change the builder/contractor. Again, if the builder/contractor is unreasonable about the contract, it will only get worse after you sign it.

Fifth: litigation is not the answer. If a case goes to litigation, it is because one side is either unreasonable and/or unscrupulous. Sure, people can have disagreements during a project. But if both sides are reasonable and honest, these issues get worked out either directly between the parties, through their equally reasonable and honest attorneys or by using a mediator. A mediator is a person selected by the parties (typically a retired judge) who hears each side's position and provides an independent third-party perspective based on experience with such matters in an effort to help parties who truly want to resolve an issue get to a fair resolution. In the case I described above, mediation was not used because the builder had no intention of voluntarily completing the work or doing any warranty repairs and the nasty tactics of its attorney showed there was no chance that the mediator's advice would have any impact. It would have been just another expensive delay. No, if a case ends up in litigation it is because the homeowner made a mistake at the time of selecting the builder/contractor and/or in selecting an attorney (or not using an attorney) to document the agreement.

Finally, my one sentence take-away is "if it is not clearly in writing so that a fifth grader could understand it, then it isn't going to get done". Make sure every one of your expectations for the home is clearly in the written contract with the builder/contractor. If not, don't sign.

OCTOBER 2016

It Even Happens to Lawyers - Lessons From An Unpaid Account

I doubt there is a single business that has a 100% collection rate on accounts receivable.

Law firms are no exception

In October, I had the unpleasant and unusual (for me) experience of having a client refuse to pay its invoice. This case started as a straight-forward dispute between my client and one of its customers. There is a typical pattern for these types of cases once a litigation is filed. This one, however, soon became much different and very difficult.

I made the dual mistake of underestimating how many dirty lawyers there are in the world as well as becoming too devoted to the case. This lead me to think that the case would end soon and that it would be okay to let the client carry a balance which could be paid after it won. After all, it would be over soon and the client's president was a good guy, we had already completed several non-litigation projects and we worked well together. Unfortunately, the opposing side pulled a variety of inappropriate tricks to make the case longer and more expensive in an effort to outlast my client.

The case ended with a tremendous victory for my client. It recovered a significant sum in a situation that, by all accounts, the opposing side lacked the money to pay. However, once the money came in, my client decided to "Monday Morning Quarterback" the case. Suddenly, it went from my firm "doing whatever is necessary to win" to "you did too much".

I reviewed the invoices at the end of the case and, as most attorneys do, had already voluntarily written off certain work relating to unforeseen events. Work such as the defendant changing attorneys 4 times during the case. This lead the trial judge to deny many of our motions to compel and for sanctions as he gave the other side a "reboot" each time it changed counsel and let the passed deadlines slide. Unfortunately, this was not satisfactory for my now victorious client. He felt, in retrospect, this should have been an easy case that any lawyer could have won at a fraction of the cost.

In short order, I was reminded that practicing law is also a business, not just a profession. No manner of reviewing the invoices and discussing the various twists and turns in the long case would persuade the client's president that he should honor his retainer agreement and pay the remaining amount due. Since a lawyer's time is his stock in trade, an action against the client to collect the amounts due would cost more in time that the amount owed. So I took the loss.

The lessons here for business owners regardless of the type of business are:

1) a client or sale is only good if it pays;

2) no matter how good the client or how long the relationship, if an invoice goes over 30 days, get a good and documented reason from the client with a firm payment date or "fire" them immediately;

3) it is better to fire a client early than end up in the position of being a "partner" with the client where the only hope of your getting paid is if the client works its way out of its problems;

4) being in business means being unpleasant sometimes, such as getting on the telephone and demanding payment or refusing to continue with a project because the client is unreasonable; and

5) there are bad people who take advantage of good people, but rather than treating everyone as a bad person, set up strict policies that apply to all in order to limit the damages and have a line item in your annual budget for the inevitable loss that will arise from a bad person taking advantage of your good nature.

So I learned my lesson - I hope by sharing it, you will avoid ending up in the same place.

SEPTEMBER 2016

Home Construction and Remodeling Contracts

Most people build just one home or undertake just one major remodeling in their lives while contractors are obviously in the business of doing several at any one time. The relative knowledge about the construction process and the allocation of risk in the contract is certainly heavily in favor of the contractor.

Yet most people don't think to have an attorney review the "standard" contract that the contractor presents or they don't want to spend the money on an attorney when, in their mind, that money could go for upgraded appliances or some other extra. This is probably the single most expensive purchase ever made or to be made, yet the minor cost of an attorney to review the contract is seen as a "waste".

It isn't that expensive, relative to the amount being spent, and it is a mistake not to have an attorney review the contractor's "standard" contract.

The last four construction litigations I've handled involved homeowners who have spent hundreds of thousands of dollars on their dream homes, only to have the contractor either fail to complete the project or perform the work in a sub-standard manner. It was only after problems arose that each of these homeowners realized the contractor's "standard" contract protected the contractor, and gave little ability to the homeowners to protect what they were buying. Worse yet, three of the contracts had no attorney fee provision which meant the homeowners could not be reimbursed for their litigation costs incurred to recover from the contractor.

I've seen million dollar homes built with a contract of just a few pages that lacked such provisions as (1) any reference to the architect's plans or specifications; (2) no start or end date; (3) no requirement that the contractor obtain lien waivers from its subcontractors and material suppliers prior to the homeowners making payments; and (4) a warranty. Now there are many good contractors who have suitable contracts, but in fairness these are written by their attorneys and cover their issues. It is up to the homeowners to negotiate for provisions that promote the proper building of the project and handling of payments. And even homeowners who are attorneys, unless they are construction law attorneys, won't fully appreciate what should be in the contract.

I have a deep familiarity with the forms of contracts used by contractors as well as the standard forms produced by the American Institute of Architects (the "AIA Contracts"). With this background, I can review the form of contract with the homeowners and in short order, produce an amendment that addresses their needs. The cost of this contract review and modification is truly nominal when compared the cost of going to court.

In the excitement of starting a new home or remodeling, homeowners either don't think about the contract or are more focused on the design and construction process. In order to preserve this good feeling, turning over the contract review to an attorney both takes it off the homeowners responsibilities, and ensures it will be done properly so the homeowner gets their home done right.

AUGUST 2016

Horses

B. Lane Hasler PC's website does not discuss it, but he has extensive experience in equestrian - horse - contracts and litigation representing barns, trainers, riders and owners.

In his 20 years of being associated with the horse world, Lane has gained an understanding of its customs and practices. And many of these are in dire need of correction.

As with any business relationship, a good contract makes a good relationship. There are four contracts that anyone who is in the horse world should know.

First, the barn contract between the owner of the horse and the manager of the barn:
This contract should clearly explain the monthly costs, the goods and services to be provided, the rules of conduct, and how the parties can part ways. It is astonishing how few barns have decent contracts. In no particular order of importance, most barn contracts fail to adequately spell out a) what types of goods (like hay) are provided and how often; b) what types of services, like turnout, are provided and how often; c) how stalls are assigned; and d) who is liable for missing equipment. One thing of consequence to the barn manager is that many contracts fail to properly identify the person responsible for paying the bill. This occurs when the horse is leased and therefore, the owner of the horse is not the person actually at the barn.

Second, the training contract between the owner and or rider and the trainer dealing with the services provided at the barn:
Although over the past decade most trainers have developed written contracts, there are still a surprising number of trainers who don't have one. For those that do, the first problem is clearly identifying the client and purpose of the training where the owner is not the rider. A trainer can provide services to train the horse, the rider, or both. As logic dictates, most training agreements focus on the rider since this is the predominant form of services provided by trainers. However, the same boilerplate form used for a rider should not be used for a horse. The nature of the services and the time required differs. Further, it must be clear who is paying for what services. A rider with a leased horse is not interested in paying to train the horse, and conversely an owner leasing a horse is not interested in paying to train the rider. In no particular order of importance, most training contracts fail to adequately spell out: a) what happens when the rider is unable to do a lesson; b) what happens if the horse is temporarily unsound; c) which care responsibilities does the trainer have as opposed to the rider or owner; and d) how does the owner or rider describe their goals so that the services provided by the trainer can be adequately measured.

Third, the show contract between the owner and or rider and the trainer dealing with services provided at a show:
This doesn't have to be a separate contract, but the primary contract must have a separate section dealing with shows. However, very few trainers have such provisions and even fewer still have separate contracts. It seems most trainers think the standard contract covers their services wherever provided. The following issues arise at shows which are not covered in a standard training agreement: a) what extra fees are charged by the trainer, such as day fees, and what is provided; b) what happens to regular lessons while at a show; c) how does the trainer schedule various clients; and d) who is liable for the horse and equipment while at the show. As a side note, the barn manager should include a provision in the barn contract making clear that the monthly fee is owed whether the horse is at the barn or away at a show. In a recent case, an owner tried to claim that no barn charges were owed while the horse was not at the barn. Although ultimately unsuccessful, the barn manager had to pay an attorney to fight this defense to the collection of unpaid fees.

Fourth, the purchase contract:
The fact that tens of thousands of dollars change hands with minimal paperwork is astounding. The horse world is rampant with fraud, primarily on the sell side, yet the contracts are typically little more than a bill of sale. Absent are such commonplace and essential provisions for the buyer such as a) representations about the horses history and condition; b) delivery of vet and show records; and c) care prior to delivery. Sellers too fail to include provisions such as a) confirmation that the buyer has inspected the horse; b) rights to repurchase (if there is a concern about the horse's next owner); and c) representations about the buyer's authority if an entity.

Lane Hasler has experience with all four types of contracts and has developed provisions applicable to the most common transactions. The up-front cost of properly documenting a transaction is minimal compared to the legal - and emotional - cost of later disagreements.

The equestrian life can be wonderful - and proper contracts go a long way toward preserving the enjoyment.

JULY 2016

Horses

B. Lane Hasler PC's website does not discuss it, but he has extensive experience in equestrian - horse - contracts and litigation representing barns, trainers, riders and owners.

In his 20 years of being associated with the horse world, Lane has gained an understanding of its customs and practices. And many of these are in dire need of correction.

As with any business relationship, a good contract makes a good relationship. There are four contracts that anyone who is in the horse world should know.

First, the barn contract between the owner of the horse and the manager of the barn:
This contract should clearly explain the monthly costs, the goods and services to be provided, the rules of conduct, and how the parties can part ways. It is astonishing how few barns have decent contracts. In no particular order of importance, most barn contracts fail to adequately spell out a) what types of goods (like hay) are provided and how often; b) what types of services, like turnout, are provided and how often; c) how stalls are assigned; and d) who is liable for missing equipment. One thing of consequence to the barn manager is that many contracts fail to properly identify the person responsible for paying the bill. This occurs when the horse is leased and therefore, the owner of the horse is not the person actually at the barn.

Second, the training contract between the owner and or rider and the trainer dealing with the services provided at the barn:
Although over the past decade most trainers have developed written contracts, there are still a surprising number of trainers who don't have one. For those that do, the first problem is clearly identifying the client and purpose of the training where the owner is not the rider. A trainer can provide services to train the horse, the rider, or both. As logic dictates, most training agreements focus on the rider since this is the predominant form of services provided by trainers. However, the same boilerplate form used for a rider should not be used for a horse. The nature of the services and the time required differs. Further, it must be clear who is paying for what services. A rider with a leased horse is not interested in paying to train the horse, and conversely an owner leasing a horse is not interested in paying to train the rider. In no particular order of importance, most training contracts fail to adequately spell out: a) what happens when the rider is unable to do a lesson; b) what happens if the horse is temporarily unsound; c) which care responsibilities does the trainer have as opposed to the rider or owner; and d) how does the owner or rider describe their goals so that the services provided by the trainer can be adequately measured.

Third, the show contract between the owner and or rider and the trainer dealing with services provided at a show:
This doesn't have to be a separate contract, but the primary contract must have a separate section dealing with shows. However, very few trainers have such provisions and even fewer still have separate contracts. It seems most trainers think the standard contract covers their services wherever provided. The following issues arise at shows which are not covered in a standard training agreement: a) what extra fees are charged by the trainer, such as day fees, and what is provided; b) what happens to regular lessons while at a show; c) how does the trainer schedule various clients; and d) who is liable for the horse and equipment while at the show. As a side note, the barn manager should include a provision in the barn contract making clear that the monthly fee is owed whether the horse is at the barn or away at a show. In a recent case, an owner tried to claim that no barn charges were owed while the horse was not at the barn. Although ultimately unsuccessful, the barn manager had to pay an attorney to fight this defense to the collection of unpaid fees.

Fourth, the purchase contract:
The fact that tens of thousands of dollars change hands with minimal paperwork is astounding. The horse world is rampant with fraud, primarily on the sell side, yet the contracts are typically little more than a bill of sale. Absent are such commonplace and essential provisions for the buyer such as a) representations about the horses history and condition; b) delivery of vet and show records; and c) care prior to delivery. Sellers too fail to include provisions such as a) confirmation that the buyer has inspected the horse; b) rights to repurchase (if there is a concern about the horse's next owner); and c) representations about the buyer's authority if an entity.

Lane Hasler has experience with all four types of contracts and has developed provisions applicable to the most common transactions. The up-front cost of properly documenting a transaction is minimal compared to the legal - and emotional - cost of later disagreements.

The equestrian life can be wonderful - and proper contracts go a long way toward preserving the enjoyment.

JUNE 2016

Contracts Make Good Clients a/k/a Lawyers Deliver the Bad News

The lure of a new project or client is hard to resist. After all, good work and the additional revenue from it are necessary to maintaining and growing a business. But with new projects and clients comes risk. Since there is no history of a good working relationship and, most importantly, prompt payment, the potential for problems is far greater than with existing clients.

Before taking on a new client, there are basic common sense steps that should be taken to avoid future legal complications.

First, ask how this client found your business. The best source of clients is word-of-mouth from an existing good client. If the new client is a referral, call the existing client to thank them. The existing client may well volunteer important information about the prospective new client, and some of it may not be positive. This may be a situation where the existing client didn't actually refer your business, but answered a question about who offers the services your business provides. The prospective new client may have then independently contacted you. If the new client is not a referral, find out how they found you and who else they talked to before contacting you. This information is important to gauge how informed the prospective new client is about the goods and services they are requesting in addition to their cost. The worst type of new client is an uniformed one who doesn't value your work.

Second, insist on a written contract. Do not fall for the "it has to be done right now" excuse for starting a project without a written contract. There are very few bona fide emergencies in life. And in today's electronic world, there is seldom an excuse for not being able to review and sign a contract prior to the start of a project.

Third, insist on a retainer or deposit. No matter how small, having the brand new client pay something prior to the start is the best determination of how they will pay for the project at the end.

Fourth, and finally, adhere to your billing practices. If your invoices are due upon receipt, insist on receiving payment within an appropriate number of days of delivery of the invoice. If the invoice is mailed - give five days for delivery, two days for processing by the client, then five days for return payment - so 12 days after mailing, the invoice should be paid. In order to make things manageable, you could round to 14 days then send a follow-up email or telephone call. The best reminder message is that your invoices are due on receipt and not "net 30 days". This gives the new client an "out" that perhaps they misunderstood, but it also reinforces the terms from the very first invoice.

New projects and clients are exciting, but the critical necessity of getting paid must take priority. Lane Hasler has dealt with the fallout from new projects and new clients gone wrong. Doing these four simple tasks can save your business from future legal complications.

MAY 2016

Solve It Up Front

All too many businesses try to handle what they consider "routine" contract changes without consulting their attorney. This is penny-wise and pound-foolish.

Every business has one or more standard contracts. In an ideal world, the contracts were created by an attorney and tailored to the business' specific needs. Thereafter, the business customizes the contract to each deal usually by putting in the counter-party's information and the specific deal terms. This doesn't require an attorney.

But when the proposed counter-party to a contract requests a change to something other than name, address, price and other such deal-specific terms, this is where a business can get into trouble by trying to handle contract changes in-house.

The cost of calling an attorney to spend a half an hour to discuss a contract change and review the language can save the business multiples of costs if the contract change leads to a later dispute.

In May, one of Lane Hasler's business clients called to discuss a change requested by a potential client which would have materially altered the indemnification provisions. In less than an hour Lane Hasler identified the issue for the client, provided alternative language, and explained to the client how to pitch the alternative language to its potential client. The goal was to protect the client without spooking the potential client.

The client was able to explain to the potential client why the proposed changes to the indemnification unfairly shifted risk to the party that had the least ability to control the risk, while also providing clarifying language acceptable to its potential client. Lane Hasler's client signed the deal, protected itself, and did so at a minimal cost.

APRIL 2016

Never say never.

A commercial contracting company came to Lane Hasler with a judgment that it obtained for breach of contract against the company for which the building was renovated and also sole owner. The owner had filed for personal bankruptcy under Chapter 13 individual repayment plan, but proposed no payment on the judgment claiming he lacked the income or assets. The contracting company's counsel realized that bankruptcy is special both in terms of its statutes and courts and the contracting company brought the case to Lane Hasler.

Upon reviewing the case, Lane Hasler had to break the bad news that the debtor company had been dissolved years earlier and had no assets (something not discovered prior to the trial which resulted in the judgment), therefore, the sole avenue for recovery was against the bankrupt individual who had all of the business assets in his own name.

But this did not end the project. After reviewing the bankruptcy petition and schedules, it was apparent that the individual was hiding assets and income. Lane Hasler successfully opposed the individual debtor's Chapter 13 bankruptcy case on the grounds that he did not qualify for relief under that section of the Bankruptcy Code. The individual debtor then converted his case to a Chapter 11 reorganization. Lane Hasler began the process of identifying the individual debtor's hidden assets and income by using the very expansive discovery statute in the Bankruptcy Code. Rather than face the dual issues of being forced to turn over his assets and income to pay the judgment and the potential ramifications of hiding these assets and income, the individual debtor dismissed his bankruptcy case.

But this did not end the project. A supplementary proceeding was started in the Circuit Court of Cook County to use Illinois state law to force the individual debtor to turnover his assets and income to satisfy the judgment. Once an order requiring such turnover was entered, the individual debtor filed another bankruptcy case, this time a Chapter 7 liquidation. The bankruptcy stay stopped the state court action and the imminent turnover of assets and seizure of income.

Lane Hasler reviewed this second bankruptcy petition and schedules and still the individual debtor was hiding assets and income. Since this was a second bankruptcy filing, the bankruptcy stay was set to expire after a short period unless the debtor extended it. Lane Hasler successfully opposed the extension of the stay. Once the stay terminated the contracting company was allowed to resume collection action in the state court.

But this did not end the project. Even though the bankruptcy stay was not extended, the individual debtor still sought to discharge the judgment meaning the contracting company would never be able to collect it. Lane Hasler filed an objection to the discharge bringing together the individual debtor's hiding of assets and income, failure to keep financial records, violation of discovery orders, and violations of the Bankruptcy Code to present a complete case. He also filed motions in the bankruptcy case to recover a portion of the contracting company's legal fees. The individual debtor tried to avoid these actions by having the bankruptcy case dismissed, but Lane Hasler convinced the Court that the individual debtor should not so easily escape the consequences of his actions. The discharge was denied, so the contracting company may continue to attempt to collect the judgment without worry of a bankruptcy. The individual debtor was sanctioned and the contacting creditor was able to recover a portion of its legal fees.

The contracting creditor is in the process of obtaining assets from the individual debtor and having them sold with the proceeds paying down the judgment. What at the outset looked like a lost cause has turned into an actual recovery

MARCH 2016

In keeping with last month's theme of spending a little on attorney fees up-front to gain peace of mind and avoid unpleasant surprises at the end, this is especially true in the equestrian world.

Horses involve both one-time purchases or lease payments and ongoing board, care and show costs. These amounts add up fast. A bad contract - or no contract at all - is all too common. Perhaps it is the nature of most owners and riders to look at horse matters as a hobby. Or perhaps it is the personal nature relationships in the horse world that either lulls people into letting their guard down or make them afraid to ask for a well written agreement. Unfortunately there are people in the horse business who take advantage of their position of trust.

All of this can be solved by having an attorney versed in equine law and customary practices read the agreement or provide one. It may well be that the agreement is fine or simply requires just a few modifications in order to bring it into balance.

Most of the agreements floating around the equine business are prepared by non-lawyers who cobble together bits and pieces from other agreements or from what they find on the Internet. These agreements are almost always unfavorable to the person buying/leasing or boarding/ showing a horse. This is not always intentional. The trainer, barn operator or horse broker may not have taken the time to have a proper and balanced agreement written. Regardless, if the relationship is to be ongoing or the dollar amount is significant, it is essential to have a good agreement.

A common error in agreements is the inclusion of a complete waiver of all rights by the buyer, boarder or rider. While it is understandable that the seller, barn operator or trainer want to avoid nuisance lawsuits, it is unreasonable to expect a waiver of rights arising from willful misconduct or gross negligence by the seller, barn operator or trainer.

A common error in board agreements is the failure to clearly describe any periodic increases in fees and whether the board contract continues if the equine is absent from the barn for an extended period of time.

Common errors in training agreements include the failure to specify the goals of the owner/ rider and the level of service to be provided.

A common error in show agreements is in fact, the complete absence of any agreement. The idea of a horse leaving its normal environs, being trailered sometimes long distances, being kept in temporary quarters and the host of show-related costs are factors which strongly advise in favor of a show agreement to identify the relative rights and responsibilities of the owner, rider, trainer and barn operator.

Lane Hasler has handled a range of equine agreements and, unfortunately, has found that litigations often arise from the absence of a properly written agreement. A consultation up front can save a great deal of difficulty if issues arise.

FEBRUARY 2016

Rather than report on a matter that closed in February, this month’s news will focus on some common sense - Spend the Money Up Front to Get It in Writing.

B. Lane Hasler has two cases which would not exist had his clients’ gotten properly written agreements.

The first case is almost four years old. Neighbors decided to go into business together. One was to run the business while the other was to loan the money for operations. No lawyers were involved in setting up the business, just a "do it yourself" corporate form book with preprinted fill-in-the-blank forms. No corporate formalities were followed meaning no shareholder meetings, director meetings or resolutions approving major actions.

Fast forward 5 years when the money neighbor wants out of the business. The operations neighbor doesn’t want to close and refuses to cooperate in winding up the business. The money neighbor hired Lane Hasler who was unsuccessful in getting even a response from the operations neighbor. A litigation is filed. The money neighbor discovers that the operations neighbor has been taking money from the business for years. The operations neighbor throws up a variety of excuses which, in the absence of proper corporate documents, take time and legal fees to defeat. The operations neighbor then denies that the money provided to the business by the money neighbor was a loan to the company. The operations neighbor claims half of the remaining money because he owns half of the shares. The Court wants to know what the corporate documents say about dissolving the business and the loan documents say about repaying the money. But there are few documents because the operations neighbor didn't do them and the money neighbor never followed up.

This litigation may last 6 years.

The second case is now into its second year, not long, but it shows all the signs of taking many more years. A family was eager to build their dream home. The contractor had a property, an architect and plans which could be customized. The contractor had “paperwork”, but it was the contractor’s own creation, full of “legalese” and, according to the contractor "couldn't be changed much because it is industry standard". The family hired a lawyer from a list maintained by the title company, one who does house closings for $500. The lawyer knew little about construction contracts and just wanted to close the sale quickly like every other routine home purchase.

The house was built and the family had it inspected. The inspection report came back with over 50 pages of errors and omissions to be corrected. The contract, however, did not require the contractor to actually fix the problems. The only remedy for the family was to cancel the contract and start all over with another house. So the family’s lawyer negotiated a bit and the parties were left with two versions of a punchlist of repairs. The family was anxious to move in before school started so, trusting the contractor, they closed. The contractor stopped responding to calls and emails. After moving in, the family discovered a host of additional errors in the work and many more missing items. The family’s attorney wanted no part of this problem so the family hired Lane Hasler. The purchase documents are incomplete. The punchlist is in dispute. The contractor and its lawyer, when they do bother to respond, deny everything. A litigation had to be filed.

This litigation may last 4 years.

The lesson here? The money spent on good lawyers doing proper documents up front would have saved a lot of money on the back end. It is possible that in both cases the deals would not have happened because the process of doing the proper documents would have flushed out the potential for wrongdoing. This would have been preferable to the years of litigation. Even if the deals did happen, at least proper documents would have made it more difficult for wrongdoing and easier to recover the resulting damages.

Everyone starting a business or buying a high-end home should have a good lawyer from the start and budget for appropriate legal fees. Every penny saved up front is a potential dollar lost later.

JANUARY 2016

A mechanic’s lien is an architect and contractor's friend; but it does no good unless actually filed.

In January, Lane Hasler documented the release of an architect's lien on a commercial building project in exchange for full payment of the architect's invoice plus interest and attorney fees. The building owner had fallen 60 days behind on invoices and the architect was worried. The architect did not want to file a mechanic’s lien because he was afraid of alienating a client and losing the job.

Lane explained that a client that doesn't pay its bills isn't much of a client. In any event, the building owner was unlikely to fire the architect during the middle of a project because it would delay the project and also, it would be very difficult to find another architect to take over a job where the first architect is unpaid. In order to address the architect's concern though, a courtesy copy of the mechanic’s lien was sent to the building owner under a cover letter which explained that Illinois statute sets deadlines for filing so the architect had no option but to file in order to protect its interests. The architect commended the building owner on the progress of the project and confirmed that the lien would not be enforced while the building owner arranged for additional funding to pay the outstanding invoices.

While the building owner could not have been pleased to receive notice of the mechanic’s lien, it wasn't like he didn't know the bills were overdue. And the way the architect presented the mechanic’s lien was professional and sympathetic to the building owner's funding issue.

The end result was the building owner paying the architect because its bank loan documents prohibited the presence of such liens. The architect avoided being shuffled to the pile of unsecured creditors. The project is ongoing and the architect is still on the job.

The information on this website is for general information purposes only. Nothing on this website should be taken as legal advice for any individual case. The information on this website is not intended to create an attorney-client relationship. BLHPC only accepts clients after personal consultation and execution of a written retainer agreement.


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