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Real Estate Contracts Must be Clear and Definite



Do My Real Estate Contracts Need to Be Clear and Definite in Order to Be Enforceable?

Yes.  The Utah Court of Appeals has clearly and repeatedly stated that an “agreement cannot be enforced if its terms are indefinite.”[1]

One example of how the courts have interpreted this requirement is found in the case of Tech Center 2000 v. Zrii.  In that case, the parties had signed a lease that was supposed to run for three years.  The lease was for a large, empty building that had recently been built, and the building was basically an empty shell, without interior walls or fixtures.  The parties intended that the tenant (Zrii) would take responsibility for building out the interior of the building and so the lease included a tenant improvement allowance.[2]

Three months before the lease term was set to begin, Zrii backed out of the contract because of a “company-wide ‘walkout’ of the majority of its distributors and employees.”  A few weeks later, the landlord (Tech Center) filed suit for breach of contract.  At trial, the court awarded damages to Tech Center in an amount of nearly $800,000.[3]

Trying to get the judgment reversed in the court of appeals, Zrii claimed that the lease was not definite enough to be enforced because the rental rate was not clear.  Zrii claimed that the tenant improvement allowance provisions were confusing when the lease was originally signed.  The Court of Appeals disagreed and said that the terms of the contract were very clear about the monthly rental rate and the rate was not connected to the improvement allowance.[4]

Can My Real Estate Contracts Be Modified After They are Created?

Yes, as long as the modification is “spelled out . . . with sufficient definiteness.”[5]

Returning to Tech Center v. Zrii, another argument that Zrii made to try to get the judgment against it reversed was that the lease had been modified after it was signed.  Zrii relied on an invoice and a piece of correspondence that Tech Center had sent after Zrii backed out of the contract.  In essence, the Landlord gave Zrii a monthly credit of $4,690.39 against the total amount of the rent due under the lease.  Zrii claimed that this credit was connected to the tenant improvement allowance in such a way as to modify the original contract and make the resulting lease too indefinite to be enforceable.  Again, however, the Court of Appeals disagreed.[6]

In Sum

Make sure that all your real estate contracts and any modifications to those contracts are clear and definite.  If you have any questions about whether a particular agreement is clear enough or definite enough, you may want to speak with an attorney.

 

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[1] Tech Ctr. 2000, LLC v. Zrii, LLC, 2015 UT App 281, ¶ 11, 363 P.3d 566.

[2] Id., ¶ 2.

[3] Id., ¶¶3-4.

[4] Id., ¶ 11

[5] Id., ¶13.

[6] Id., ¶¶ 12-14.