Why Written Contracts without Legal Assistance may Cause Disputes in California?

      The California decision in Tiffany Builders v. Delrahim concerned events at a coffee shop in Calabasas where     David Delrahim made Edwart Der Rostamian a business proposal. Rostamian got his notebook, asked a server for a pen, and worked with Delrahim to compose two pages of text. When they were done, each man signed the paper. Rostamian later sued Delrahim on contract claims.

The trial court granted Delrahim’s motion for summary judgment, ruling the Calabasas writing was tooindefinite to be a contract.

 

The appellate court reversed that point but affirmed the ruling against Rostamian’s claims for tortious interference with a contract.

 

According to Rostamian, the Calabasas discussion concerned the purchase of 13 gas stations. He argued that, if considered in the context of his and Delrahim’s ongoing negotiations, their signed writing was a binding contract.

 

This account was one-sided because Delrahim chose not to offer declarations giving his version of the facts.This one-sided account was the record in the trial court.

 

The gas stations in question belonged to seller Ibrihim Mekhail, operating through a family trust. Mekhail was not at the coffee shop and was not a party to this case.

 

Mekhail was selling the 13 stations as a block. He was offering nine of the 13 with their attached land and the other four without the land: only the businesses were for sale. The parties called the four the “dealer sites.”

 

Rostamian opened an escrow to which Carol International had contributed about $250,000, but the escrow didnot close for various reasons. Rostamian eventually would assign Tiffany’s rights in the deal to CarolInternational, although it is not clear exactly when this happened. In any event, Rostamian kept searching fora way to consummate the transaction and to profit from his efforts.

 

Then in November 2015, Delrahim said he had a proposal to discuss in person with Rostamian. The two met atthe Calabasas coffee shop.

 

Delrahim proposed Rostamian should back his company out of the pending escrow so Delrahim could buy the stations from Mekhail for $12.4 million, or less if Delrahim and Rostamian could negotiate a lowerprice. Delrahim would pay Rostamian $500,000 to do this.

 

Delrahim also proposed Rostamian would own the four dealer sites. Delrahim would charge Rostamian a monthly fee to run these dealer sites, and Rostamian would reap their profit.

 

Delrahim and Rostamian worked together to word their deal. This two-page hand-written document is central to this appeal. We call it the Writing.

 

In short, Delrahim would take the lead in the stations deal in return for guaranteeing benefits for Rostamian.Delrahim would rescue Rostamian’s foundering escrow for Delrahim’s own benefit: Delrahim would buy the 13 stations at a price the two hoped they could negotiate down from the $12.4 million figure.

 

Delrahim would own nine stations that were not dealer sites, and would gain a $4,000 a month fee for operating the four dealer sites. Delrahim would pay Rostamian $500,000 and would give Rostamian ownership of, and profits from, the dealer sites.

 

None of that happened. To Rostamian’s dismay, Delrahim decided to deal directly with Mikhail and to cut Rostamian out of the picture. Delrahim bought the 13 stations for about $11 million. Rostamian got nothing.

 

Rostamian and Tiffany sued Delrahim and Blue Vista for breach of contract, specific performance, intentionaland negligent interference with prospective economic advantage, and unfair business practices.

 

Delrahim and Blue Vista moved for summary judgment.

 

The trial court granted Delrahim’s summary judgment motion. The court reasoned the Writing was too indefinite to be a contract.

 

The court considered the parol (i.e., oral) evidence from Rostamian’s declaration but concluded this evidence failed to clarify the terms to a legally acceptable degree.The court ruled the most critical omission was who would own the 13 gas stations upon completion of the deal.

 

Rostamian and Tiffany appealed the judgment against them.

 

As supplemented by parol evidence, the Writing was definite enough to be an enforceable contract. The grantof summary judgment was error.

 

Three streams of law converge to control this case.

 

The first rule concerns parol evidence, also called extrinsic evidence.

 

The “test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.”

 

Rostamian’s declaration satisfied this test. It was relevant to prove a meaning to which the Writing was reasonably susceptible. The trial court did not rule to the contrary. It properly accepted Rostamian’s explanation of the Writing.

 

Delrahim incorrectly argued that Rostamian’s assertion that the contract is unambiguous estops him from arguing extrinsic evidence provides clarity. Briefing commonly, and acceptably, argues in the alternative.

 

The Writing, as explicated by Rostamian, was not too indefinite to enforce. It was not an illusory contract.When people pen their names to a document they have drafted together, the law accords their act a potentmeaning.

 

Delrahim and Rostamian signed their joint creation, thereby enacting a ritual signifying commitment: anexchange of promises. Courts strive to effectuate designs like that. Powerful authority proves it.

 

We construe instruments to make them effective rather than void. This rule is of cardinal importance.

The law leans against destroying contracts because of uncertainty. If feasible, courts construe agreements to carry out the reasonable intention of the parties.

 

“An interpretation which gives effect is preferred to one which makes void.” (Civ. Code, § 3541.)

 

“A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, andcapable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code., § 1643.) 

 

Courts will imply stipulations necessary to make a contract reasonable regarding matters to which the contract manifests no contrary intention. (Civ. Code, § 1655.)

 

Indefiniteness as to an essential term may prevent the creation of an enforceable contract, but indefiniteness is a matter of degree. All agreements have some degree of indefiniteness.

 

People must be held to their promises. If the parties have concluded a transaction in which it appears theyintend to make a contract, courts should not frustrate their intention if it is possible to reach a just result, eventhough this requires a choice among conflicting meanings and the filling of gaps the parties have left. Thisrule comes nearer to attaining the purpose of the contracting parties than any other.

 

There are two reasons not to enforce an indefinite agreement.

 

First, the agreement may be too indefinite for the court to administer—no remedy can be properly framed.

 

Second, the indefiniteness of the agreement may show a lack of contractual intent. Courts should be slow to come to this

conclusion. Many a gap in terms can be filled, and should be,

with a result that is consistent with what the parties said and

that is more just to both than would be a refusal of enforcement.

 

The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breachand for giving an appropriate remedy.

 

When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.

 

Rostamian’s explanation of the Writing made it definite enough for judicial enforcement. 

His version, which was binding on the trial court at the summary judgment stage, was a series of clear promises.

 

A contract need not specify price if price can be objectively determined. The absence of a price provision doesnot render an otherwise valid contract void.

 

In the process of negotiating an agreement, price is a term frequently left indefinite and to be settled by future agreement.

 

If the parties provide a practical method for determining this price, there is no indefiniteness that prevents the agreement from being an enforceable contract.

 

Athough the necessity for definiteness may compel the court to find that the language used is too uncertain to begiven any reasonable effect, when the parties’ language and conduct evidences an intent to contract, and there issome reasonable means for giving an appropriate remedy, the court will strain to implement their intent.

LESSONS:

 

1. Contracts written without assistance of legal counsel are often disputed by the parties because of ambiguities and inconsistencies.

 

2.  The law leans against destroying contracts because of uncertainty. If feasible, courts construe agreements to carry out the reasonable intention of the parties.

 

3.  "An interpretation which gives effect is preferred to one which makes void.” (Civ. Code, § 3541.)

 

4.  “A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, andcapable of being carried into effect, if it can be done without violating the intention of the parties.” (Civ. Code., § 1643.) 

 

5.  Courts will imply stipulations necessary to make a contract reasonable regarding matters to which the contract manifests no contrary intention. (Civ. Code, § 1655.)

Is a Duty Owed by a Landowner for an Open and Obvious Defect?

The recent California case of Nicoletti v. Kest, involved an appeal from a trial court order granting Respondent Dolphin Marina Apartments’ (Dolphin) summary judgment motion against Appellant Susan Nicoletti (Nicoletti). 

The appellate court concluded that Dolphin owed no duty to warn Nicoletti of a water current that openly and obviously interfered with one of three building entrances. 

 

In 2020, Nicoletti took her neighbor’s dog for a walk around Dolphin’s apartment complex located in Marina Del Rey, California. Nicoletti observed that it was raining that day with thunderstorms. 

 

At around 3:30 p.m., Nicoletti crossed the driveway of the North Side Gate entrance that led to the underground parking lot. The apartment complex also had a South Side Gate entrance and another entrance on Panay Way. 

 

Nicoletti was a thirteen-year resident of Dolphin’s apartment complex and was familiar with its premises. Nicoletti testified that she had gone past the North Side Gate “thousands of times” before the incident. 

 

Before crossing, Nicoletti observed that the concrete on the North Side Gate driveway was wet, and rainwater formed a current that was running down the driveway. Nicoletti did not observe any caution tape or other warning advisements. 

 

Nicoletti proceeded to cross, and the rainwater current knocked her down. Nicoletti then fell down the North Side Gate driveway and hit the gate at the bottom of the driveway. Nicoletti sustained injuries to her right shoulder, left knee, and face. 

 

Nicoletti filed a complaint against Dolphin alleging general negligence and premises liability because Dolphin had a duty to warn of the running rainwater on the driveway with caution tape or other warning signals. 

 

Dolphin filed a motion for summary judgment arguing that because the running rainwater was open and obvious, Dolphin had no duty to warn. 

 

The trial court granted Dolphin’s motion for summary judgment. 

 

The trial court reasoned that Dolphin did not have a duty to warn of the running rainwater on the driveway because it was a dangerous condition that was sufficiently obvious.

The trial court concluded that a reasonably careful person would know that the running water on the driveway was dangerous and thus, the undisputed facts show that she was aware of an open and obvious condition for which the Defendant had no duty of care about which to warn her. 

 

Nicoletti argued that the dangerous condition caused by the lateral force of rainwater was not open and obvious. As such, Dolphin had a duty to warn of the dangerous condition.

 

A landowner must maintain land in its possession and control in a reasonably safe condition. 

 

But an accident on a landowner’s property does not necessarily create premises liability.  

 

The elements of a cause of action for premises liability are the same as those for negligence. 

The plaintiff must prove duty, breach of duty, causation, and damages. 

 

Whether a duty should be imposed on a defendant in a premises liability action depends on a variety of policy considerations, known as the Rowland factors. 

 

The “most important” of these considerations or factors is “the foreseeability of injury to another.” 

 

A court’s task—in determining duty—is not to decide whether a particular plaintiff’s injury was reasonably foreseeable in light of a particular defendant’s conduct, but rather to evaluate more generally whether the category of negligent conduct at issue is sufficiently likely to result in the kind of harm experienced that liability may appropriately be imposed on the negligent party.

 

Foreseeability, when analyzed to determine the existence or scope of a duty, is a question of law to be decided by the court.

 

A harm is typically not foreseeable if the “dangerous condition is open and obvious.” 

 

Generally, if a danger is so obvious that a person could reasonably be expected to see it, the condition itself serves as a warning, and the landowner is under no further duty to remedy or warn of the condition.

 

In that situation, owners and possessors of land are entitled to assume others will "perceive the obvious" and take action to avoid the dangerous condition. 

 

The presence of standing water and the manner in which it drained into or toward the transportation office would have been obvious and apparent to any reasonably observant person, as would the danger that the water might create slippery surfaces and cause one to slip and fall. 

 

As such, the property owner had no duty to warn of the dangerous condition. 

 

Nicoletti contended that although she was aware that it was raining and the ground on the driveway to the North Side Gate was wet with rainwater, she did not know that the current of rainwater posed a danger to her safety. 

 

Nicoletti did not dispute that she observed that there was water running down the driveway. 

 

Running water on a surface is arguably a more obvious danger than standing water. Not only does the water current make the surface slippery, but also a reasonable person would observe that running water could create a force that would cause someone to fall over. 

 

Further, it is a matter of common knowledge among children and adults that wet concrete is slippery and that, when on a slanting incline such as a driveway, it does not provide a safe footing. 

 

Accordingly, the dangerous condition was open and obvious to Nicoletti, and Dolphin had no duty to warn. 

 

Nicoletti further argued that necessity required her to cross the North Side Gate driveway. 

 

The appellate court disagreed, and concluded that she was not required to use the North Side Gate entrance and could have used a different entrance to enter the apartment complex. 

 

While as a general rule, a landowner does not have a duty to remedy or warn of an obviously dangerous condition on his or her property, this is not true in all cases. It is foreseeable that even an obvious danger may cause injury, if the practical necessity of encountering the danger, when weighed against the apparent risk involved, is such that under the circumstances, a person might choose to encounter the danger. 

 

A landowner’s duty of care is not negated when it is foreseeable that, because of necessity or other circumstances, a person may choose to encounter the condition.

 

Nicoletti was not required to use the North Side Gate entrance to the apartment complex. Nicoletti failed to rebut Dolphin’s evidence showing that the apartment complex had multiple entrances. 

 

Nicoletti’s testimony that she commonly used one of the three entrances falls short of establishing a “necessity” to use that entrance when water currents impeded it.

 

Other residents’ common use of an entrance does not point to a “necessity” to use that particular entrance. 

 

Accordingly, the undisputed facts indicated that it was not foreseeable that Nicoletti would knowingly embrace an entirely obvious risk by choosing to cross the North Side Gate driveway. 

 

The California Supreme Court has declared that courts must assign tort duties to ensure that those best situated to prevent such injuries are incentivized to do so. 

 

Under these circumstances, Nicoletti was in a better position to avoid the obvious danger of walking across a current of water that formed as a result of a rainstorm that began that same day. 

 

Nicoletti could have chosen to use a different entrance. 

The burden imposed on Dolphin to constantly monitor weather conditions and immediately install warning signals is outweighed by Nicoletti’s ability to avoid a condition she should have observed as obviously dangerous. 

 

LESSONS:

 

1.         A landowner must maintain land in its possession and control in a reasonably safe condition. 

 

2.         The elements of a cause of action for premises liability are the same as those for negligence. The plaintiff must prove duty, breach of duty, causation, and damages. 

 

3.         A harm is typically not foreseeable if the “dangerous condition is open and obvious.” 

 

4.         Generally, if a danger is so obvious that a person could reasonably be expected to see it, the condition itself serves as a warning, and the landowner is under no further duty to remedy or warn of the condition.

When is it a Lease or a License Agreement in California Real Estate?

This issue was explored in the recent California case of Castaic Studios, LLC v. Wonderland Studios, LLC. 

Plaintiff Castaic Studios, LLC (Castaic) and Wonderland Studios, LLC (Wonderland) entered an agreement under which Castaic granted Wonderland the “exclusive right to use” certain areas of its commercial property. 

 

The agreement specified that it was a “license agreement,” as opposed to a lease, with Castaic “retain[ing] legal possession and control” of the premises. 

 

The agreement was to be “governed by the contract[] laws and not by the landlord tenant laws.” 

 

When Wonderland defaulted, Castaic nonetheless filed an unlawful detainer action seeking possession of the property. 

 

The trial court sustained Wonderland’s demurrer without leave to amend, reasoning that Castaic had waived its right to pursue the remedy of unlawful detainer. 

 

This was correct, so the appellate court affirmed. 

 

Castaic owns a commercial property in Castaic, California. In October 2021, Castaic entered a “License Agreement” with Wonderland, under which Castaic granted Wonderland “the exclusive,” but “non-possessory” right “for the use of” the property, with the exception of a stage area and storage building.

 

The agreement afforded Wonderland 35 consecutive one-month options to extend. To exercise these options, Wonderland was required to timely make all payments owed and to send Castaic a letter of intention to extend the term for the next period at least 20 days before the end of the current month. 

 

In July 2022, Wonderland was in default of the payments owed and failed to timely send a letter of intention to extend the term for August of 2022 as required.

 

Therefore, Castaic alleged the agreement expired by its own terms as of July 31, 2022.

 

On July 13, 2022, Castaic sent Wonderland an email notifying Wonderland that it was in default.

 

Section 6 of the agreement states it was not a lease or any other interest in real property. It was a contractual arrangement that creates a revocable license. Licensor retains legal possession and control of the Premises and the areas assigned to Licensee. Licensor has the right to terminate this Agreement due to Licensee's default.

 

Section 13.3(a) provides that if Wonderland defaults, Castaic may immediately terminate Licensee’s right to use of the Premises by any lawful means, in which case Licensor’s obligations under this Agreement shall immediately terminate and Licensor shall have option to immediately take over use of the Premises from the Licensee.

 

Section 29 provides, “[t]his agreement will be governed by the contract[] laws and not by the landlord tenant laws.” 

 

Castaic filed its complaint for unlawful detainer against Wonderland on August 22, 2022, seeking possession of the property and unpaid “rent.” 

 

Wonderland demurred on the grounds the agreement expressly states it is not governed by landlord-tenant laws and the three-day notice Castaic served on Wonderland did not contain the information that Code of Civil Procedure section 1161(2) requires before the filing of an unlawful detainer action. 

 

The trial court sustained the demurrer without leave to amend. 

 

Relying on sections 6 and 29 (designating agreement as “revocable license,” “not a lease,” and governing law as “contract[] law,” not “landlord tenant law”), the court concluded that Castaic had waived its right to pursue the remedy of unlawful detainer. 

 

The court reasoned Castaic has not alleged and cannot allege a relationship between it and Wonderland that would allow Castaic to pursue an unlawful detainer action against Wonderland.

 

The trial court also observed that even if Castaic could state a claim under the unlawful detainer statute, Castaic failed to comply with the statutory notice requirements set forth in Code of Civil Procedure section 1161(2).

 

Castaic asserted that the trial court erred in sustaining Wonderland’s demurrer without leave to amend, arguing that despite express designation of “contract[] laws” and disavowal of “landlord tenant laws” as the governing law, the agreement did not preclude Castaic from resorting to the summary proceedings of unlawful detainer.  

 

The fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract. 

 

When the contract is clear and explicit, the parties’ intent is determined solely by reference to the language of the agreement.”

 

The words of the contract are to be understood in their ordinary and popular sense.

 

The principles of contract interpretation apply equally to leases as to any other kind of contract. 

 

Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.

 

Unlawful detainer is a remedy available to a landlord against a tenant who breaches a lease and is intended and designed to provide an expeditious remedy for the recovery of possession of real property.

 

Whether an agreement constitutes a lease or a license is “a subtle pursuit.” 

 

Although Castaic argued at length that the agreement was in fact a lease despite its express designation to the contrary, the appellate court did not need to decide this issue to resolve the appeal. 

 

Even assuming the agreement contains some elements of a lease, its express terms show the parties’ intent to waive any rights afforded by the landlord-tenant laws, including a landlord’s remedy of unlawful detainer. That is what the trial court concluded, and the appellate court agreed. 

 

The parties’ intent to avoid application of landlord-tenant law is evinced by Castaic retaining “legal possession” of the premises. Simply put, the parties unmistakably recorded their intent to forego the application of laws specific to landlord tenant relationships. 

 

On appeal, Castaic urged that the parties may not elect to contract around particular statutory protections.

 

But Castaic did not cite a single authority that supports this position. Nor did Castaic argue that the parties’ election to disavow the applicability of landlord-tenant laws violated any public policy. 

 

A bedrock principle of contract law in California has always been that competent parties should have the utmost liberty of contract to arrange their affairs according to their own judgment so long as they do not contravene positive law or public policy. 

 

Because the parties were found to have waived the landlord-tenant laws, no unlawful detainer could be filed.

 

LESSONS:

 

1.         The fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract. 

 

2.         When the contract is clear and explicit, the parties’ intent is determined solely by reference to the language of the agreement.”

 

3.         The words of the contract are to be understood in their ordinary and popular sense. 

 

4.         The principles of contract interpretation apply equally to leases as to any other kind of contract. 

 

5.         Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.