Construction Contracts
Recent United States District Court Ruling Highlights the Importance of Defining Terms when Drafting Construction and Real Estate Agreements
Adam J. Sigman | Sirote & Permutt PC
June 9, 2015
A recent ruling by a United States district court demonstrates that the fate of a multimillion dollar construction project can be decided by the interpretation of one word in a contractual agreement. In 2004, the Chicago Cubs and certain rooftop businesses adjacent to Wrigley Field entered into a license agreement, prohibiting the Cubs from erecting any obstructions blocking the rooftop businesses’ view of Wrigley Field in exchange for a certain percentage of profits arising from the rooftop businesses’ ticket sales. The license agreement, however, contained a specific exception:
“Any expansion of Wrigley Field approved by governmental authorities shall not be a violation of this Agreement, including this section.”
In 2014, the Cubs received approval from the appropriate governmental authorities to construct eight outfield signs, including video boards in the left and right field. The right field video board as constructed would block the rooftop businesses’ view of Wrigley Field. The rooftop businesses filed a request for a preliminary injunction, arguing that the Cubs anticipatorily breached the license agreement by initiating construction of the right field video board because the term “expansion” in the context of the exception is limited to an expansion of seating capacity at Wrigley Field, not an expansion of any aspect of Wrigley Field.
On April 2, 2015, Judge Virginia M. Kendall of the Northern District of Illinois denied the rooftop businesses’ request for a preliminary injunction, holding that the use of “expansion” within the exception is not limited to an expansion of seating capacity. Judge Kendall’s ruling focused on the use of “expansion” in the context of the section containing the exception, emphasizing that the section’s language incorporates the concept of “expansion” in contexts not related to seating capacity and an interpretation limiting the section to an expansion of seating capacity would render each subsection “unnecessary and illogical”.
This ruling is a good example of how time allocated to defining terms within an agreement, in this case, “expansion” or “Wrigley Field”, during the negotiation period can benefit all parties to an agreement, likely saving the parties’ time and money by avoiding unnecessary litigation. Construction agreements, real estate agreements and any other agreements containing construction/improvements on land clauses must be carefully drafted to ensure that the terms of the agreement accurately reflect the mutual understanding of all parties involved.
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SOURCE: www.lexology.com