How to Modify a Contract

Varying circumstances may require parties to a contract to modify their original agreement.  For example, contract modification may be necessary if parties want to extend a contract, change its duration, alter the quantity of goods to be sold or delivered, change a delivery time or place, or change a payment amount or type.

Parties typically can modify a contract at any time, as long as all the parties agree to the changes.  Minor changes in a contract can often be handwritten into the original document, and then signed or initialed by the parties. For example, a purchase order may be modified to provide for additional items and initialed and signed by the seller and buyer evidencing an agreement to the modification.

Major changes to a contract will often have to be re-negotiated and added to the agreement as an addendum.  Oftentimes, a well drafted contract will outline terms explaining how a modification may be effected. Typical terms include that the contract may only be modified in a writing that is signed and executed by all parties. Valid contract modifications will be enforced and are binding on the parties.

It is always best to ensure that all contract terms are accurate before the agreement is signed. Sometimes, modifying a contract after it has been signed can be complicated or impractical, particularly if one or both parties have already begun performing their contractual duties.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and  businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

Misrepresentation in a Contract

If a party was dishonest about a material fact during the drafting process of a contract, the other party may be able to take the contract to court and argue that it should be rescinded, or cancelled, due to misrepresentation.  Moreover, if the honest party performed the contract because he, she, or it justifiably relied on the misrepresentation in a contract of material fact, he, she, or it may be able to collect damages if a court finds that the non-breaching party was damaged by the misrepresentation, or that the misrepresentation was intentional.

Misrepresentation in a contract circumstance occurs when a party to a contract makes a representation, using either words or conduct that communicates a false or misleading understanding, thereby inducing another party to sign a contract.  For example, if a seller of goods makes false statements or promises about the quality or nature of a product to get a consumer to agree to purchase it, that could constitute misrepresentation.

There are different types of misrepresentation in a contract, including fraudulent misrepresentation and negligent misrepresentation.

Fraudulent misrepresentation may be found where a knowingly false representation was made with the intent to deceive.  As mentioned earlier, if an individual justifiably relies on an intentionally made fraudulent misrepresentation and is harmed as a result of this reliance, they may recover damages to be compensated for their harm, which may include punitive damages.

Negligent misrepresentation occurs when a representation is made carelessly. Damages are generally available for negligent misrepresentation, however punitive damages will not be awarded in a negligent misrepresentation case.   Additionally, in the event that misrepresentation can be proven, rescission may be granted, which would release the parties from their contractual obligations.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law needs.

What Constitutes a Trade Secret?

Unlike patents and trademarks, trade secrets are protected without any procedural formalities associated with the benefits of registration with a government agency. The benefit to this is that a trade secret can be protected for an unlimited period of time and requires no public disclosure. The downside is that defining and protecting a trade secret can be trickier.

There are different definitions of what constitutes a “trade secret.” California law has adopted the Uniform Trade Secrets Act definition, qualifying a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that meets two qualifications. The first qualification is that the information must derive “independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.”  The second qualification is that the trade secret owner must take reasonable steps to maintain the secrecy of the information.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, an international agreement administered by the World Trade Organization, similarly defines a trade secret.  According to the TRIPS Agreement, trade secret information cannot be generally known among, or readily accessible to, circles that normally deal with the kind of information in question.  It must also have commercial value because it is a secret, and it must have been subject to reasonable steps by the rightful holder of the information to keep it secret.

Thus, if a company deals with third parties who are privy to a company’s trade secret, it is important to always have them sign confidentiality agreements to make sure they understand that the information is a secret.  Taking those steps not only gives the company a cause of action for breach, but also evidences reasonable steps to maintain the secrecy of the trade secret.  Information that constitutes a trade secret can include processes that make production more efficient, a formula (like the Coca-Cola soft drink formula), customer lists, and proprietary business plans.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business needs.

California Shareholder Rights

“Economic” Shareholder Rights

Shareholders invest in corporations primarily for economic gain or profit.  The two main ways shareholders can profit from a corporation are by receiving distributions of the company’s profits and by selling all or part of their interest in the corporation. These correspond with the two main “economic” shareholder rights: the right to receive dividends and the right to sell shares. Notably, shareholders only have the right to receive dividends as they are declared by the corporation’s board of directors, and directors are not obligated to declare dividends.  In addition, some investments and receipt of shares may come with limitations on transferability of the shares.

Shareholder Voting Rights

A company’s board of directors has the right to manage the company’s business. However, shareholders have the right to vote on important matters relating to the business, which gives them some control over the corporation as well. Most importantly, shareholders have the right to elect directors.

Shareholder Inspection Rights

Under California Corporations Code Section 1601, shareholders also have right to inspect the corporate documents, such as the incorporation record, accounting books, and meeting minutes.

Derivative Actions and Shareholder Rights

Derivative actions are brought by a shareholder on behalf of a corporation. Officers, directors, and majority shareholders owe a corporation a fiduciary duty. Someone who owes a fiduciary duty and who breaches that duty can be held liable to the corporation for damages.  Thus, in a derivative action a shareholder seeks judicial enforcement of, and redress for breach of, management’s fiduciary duties to the corporation and its shareholders by means of derivative litigation.

Involuntary Dissolution of the Corporation

Under California law, one-half of the directors or one-third of company shareholders can sue for involuntary dissolution of a corporation. A corporate dissolution may consist of a court approved liquidation or sale of corporate assets. However, the involuntary dissolution of a corporation may be avoided if at least 50% of its shareholders elect to purchase, for cash, the shares owned by the shareholders initiating the dissolution proceeding.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business needs, or visit our Shareholder Rights page for more information.

Quiet Enjoyment for a Commercial Tenant in California

Previously on our blog, we have discussed the many differences between rights held by residential as opposed to commercial tenants. Recently we examined how both residential and commercial tenants have a right to quiet enjoyment of their rented property, but that it is sometimes more difficult for commercial tenants to escape the term of a lease for a violation of the covenant. Here, we will discuss what quiet enjoyment means for a commercial tenant.

The right to quiet enjoyment requires a landlord to ensure that a tenants’ use and enjoyment of the property will not be disturbed.  Every California lease includes a covenant of quiet enjoyment, and such a covenant is often an express term in commercial leases.  But unlike residential rental agreements, parties to a commercial lease can modify or waive the covenant of quiet enjoyment.

Even if a commercial lease contains a provision ensuring quiet use and enjoyment, another provision in the lease can modify or limit the remedies available for a breach by the landlord. For example, in one case, the lease agreement reserved a right for the landlord to renovate the property. The Landlord did so, but the tenant complained that the renovation, which was diminishing the tenant’s visibility to customers and causing dust to enter the premises, was interfering with his right to quiet use and enjoyment. A court held that the provision allowing remodeling without claims for damages modified the covenant of quiet enjoyment, and the tenant lost. Fritelli, Inc., v. 350 North Canyon, 202 Cal.App.4th 35 (2011).

As this case shows, the answer to “What does quiet enjoyment mean for a commercial tenant” is often determined by the specific terms of the commercial lease at issue.  The right can be eliminated or modified by a term or multiple terms of the lease agreement, making a particular commercial tenant’s rights as unique as their lease.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business or real estate law concerns.

Negotiating a Commercial Lease

Unlike run of the mill residential leases, many terms of commercial leases are usually negotiable, although your leverage in the negotiation will be affected by your real estate knowledge and the current rental market. For example, if there is a surplus of commercial space available in your preferred area, you will likely have more leverage to negotiate terms with a prospective landlord.  Similarly, having confidence in and being informed about the terms of the lease, strength of the market, and desirability of the property, you will also work in your favor during negotiations.  In negotiating a commercial lease, common negotiating points include the rent, rent increases, lease term, common area operating expenses, and sublease and assignment terms.

Negotiating a Commercial Lease: Rent Payment and Increases

Although landlords generally do not lower the rental prices they offer, they may consider reduced rent, i.e., rent concessions, to compensate for moving costs, tenant improvements, or caps on rent increases. Commercial lease agreements almost always contain an annual percentage increase on rent. The amount of the annual increase is often negotiable, as is a cap on the percentage increase. If the lease space needs a lot of improvement, this may be used to lower rent or support a request that the landlord cover certain improvements.

More complicated commercial leases, such as leases with rental provisions that include percentages of net sales as a component of the monthly rental amount, are often subject to more intensive negotiations where the tenant and the landlord would look to balance the benefits of a lower base rent against the potential for high returns from sales figures.

Negotiating a Commercial Lease: The Term of the Lease

Depending on whether you are a commercial landlord or tenant, you may prefer either a short or long term lease.  Generally, a tenant will prefer a short-term lease, which will allow more flexibility.  A commercial landlord will usually prefer a long-term lease, ensuring steady rent for a period of years. Commercial tenants negotiating a commercial lease who have a location-sensitive businesses often find that long term leases are more beneficial because they can rely on the affordable business space for a predictable period of time, and the stress of moving frequently is eliminated.  In addition, a long term lease generally allows tenants to lock in more favorable rental rates. A common way to balance the competing benefits of long term and short term  leases is to negotiate option rights, i.e., the right to renew the lease for successive terms.

Negotiating a Commercial Lease: Subleases or Assignments

The right to sublease or assign a space is also negotiable. Tenants usually seek this right to protect themselves from being locked into a space when business needs require the tenant to move. Landlords sometimes will agree to a sublease or assignment in order to make sure their property is filled, but some either specifically prohibit or restrict such rights to protect the quality and type of tenants.  Granting the tenant sublease and assignment rights subject to the landlord’s “reasonable” discretion and approval is a good way to reach a reasonable compromise on these issues.

If you have any questions about negotiating a commercial lease, contact an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your business or real estate.

Complications of Buying and Selling Property with Easements

Whether you are buying or selling real estate, it is important to determine whether any easements encumber the property, and, if there are, what effect the easements will have on the deal.

First, an easement is generally defined as a right to cross or use someone else’s land for a specified purpose. For example, your neighbor may have a small easement over your land to access the closest main road. The easement does not allow your neighbor to occupy the land, but your neighbor can stop other people from using your land (including you) if it interferes with his or her access to the main road. You still have every right, as the property owner, to use that land too.

So now the question becomes, if you are moving and selling the property, what happens to that easement? Will your neighbor be out of luck and unable to access the main road?

As a seller, you need to tell potential buyers about the easement. When the property sells, the easement has to be incorporated in the deed and all other legal documents. The seller also has to tell the easement holder, in our example the neighbor, that the property is being sold.

Easements need to be publicly recorded in the County Recorder’s Officer (or similar government agency) so that they show up on a title search.

Once a real estate buyer is informed about an easement, he or she should obtain a copy of the recorded easement and contact the easement holder and see what, if any, limitations exist with respect to the easement, or put another way, exactly how the easement affects the property.  For example, does the easement exist indefinitely, or does it cease when the land is divided or sold?

These important issues are best to work out beforehand with all parties involved to avoid future litigation over the use and enjoyment of the property and the easement.

If you have any questions about easements or real estate transactions, contact an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

The Difference Between a Merger and an Acquisition

What is the difference between a merger and an acquisition?  The terms “merger” and “acquisition” are common business terms, but they are often inappropriately used interchangeably, when in fact the two transactions are rather different. If you are planning to combine or purchase assets from another company it is imperative that  you understand the benefits and drawbacks of each.

Merger

In a merger, usually two or more businesses wind down as separate entities, and then a new entity is formed – that is, two entities merge into one new entity. The assets and liabilities of both the original businesses are often carried over to the new company.

Recently, mergers have been especially prevalent in the healthcare and airline industries. For example, one of the biggest mergers has been American Airlines and U.S. Airways. Final steps of the 2010 merger, such as a single reservation system and consolidating frequent flyer programs, are still not complete because of the size of this operation.

Acquisition

In an acquisition, usually one business purchases all or part of another business. As in a merger, most acquisitions involve lengthy negotiations, due diligence, and portfolio transfers. In addition, sellers are generally required to provide information about its’ or their finances, personnel, business opportunities, marketing practices, insurance, and legal status.

Acquisitions are unique and fact-specific.  For example, a seller may finance part of the sale in one transaction, or complete an acquisition using a transfer of stock or cash or both.

Examples of major acquisitions just this year include AT&T’s $69.8 billion purchase of DirectTV and Comcast’s $45 billion acquisition of Time Warner Cable.

If you are considering an acquisition or merger it is always best to consult with an attorney who can help find the most advantageous transaction in light of all the factors and issues in your particular case.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

Protecting Your Business from Defamation

Consumer review based websites like Yelp have grown in popularity and power. Consumer voices are often trusted, and a bad online review can have costly consequences. However, online anonymity has led to abuse, and if someone has posted an online review about your business that is false there may be legal recourse for your injuries.

Defamation is an action brought to defend reputation. It involves intentional publication of false, defamatory, and unprivileged information that has a tendency to injure or cause special damage.

One recent case involving defamation claims, mLogica, Inc., et al., v. Pankaj Karan, CA Super. Ct. No. 30-2010-00342873 (December 30, 2013), shows how defamation for online activity works.  Two companies entered into a contract for the creation of some custom software. The party purchasing the software posted numerous negative reviews about the other company on its blog, and emailed its business partners and customers alleging that the software was delivered late and that the company employees were “swindlers” who “milked many of their clients of money and time.” The emails were very damaging to the company’s reputation in the industry, caused many projects to be cut, and a resulted in a significant loss of income.

While truth is an insurmountable defense in defamation actions,  the software company was able to show at trial that the software was fully functional and delivered on time. Furthermore, at trial, the defendant could not identify one unpaid vendor or defrauded customer.

A jury in Orange County, California awarded $1.23 million  to the software company for the damage to its reputation. The decision and verdict were affirmed on appeal.  In fact, the appellate court believed that the evidence supported damages of  “about $10 million. Maybe more.”

This case shows that there is a balance between preventing people from being critical on the Internet, and limiting false speech that does not promote the “marketplace of ideas.”

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute concerns you may have.

Acquiring Real Property

Acquiring Real Property

Buying commercial real estate can be a complicated process, but it does not have to be. Thorough research and hiring qualified professionals can help streamline an otherwise difficult transaction and protect against potential liability and hidden problems. Although there is always some level of risk associated with purchasing property, many common pitfalls can be avoided by considering the items listed below.

Location, Location, Location

For as much emphasis as we put on where we buy property, it is important to remember that the character of any area can change. Because of this, while an area may be hot at the moment, consider researching businesses that may be moving in or developing in the area, as well as those which may be planning to move in the future. Also check current or future municipal plans, such as pending proposals for re-zoning certain areas, or if there are plans for schools, parks, or special housing developments.

Liquidity Concerns for Businesses

Buying property for your business can save lots of money through control over overhead costs.  Also, by purchasing the property, your business or portfolio may also acquire an asset that will (ideally) appreciate over time. That said, if you are going to make this large investment it is critical to make sure you are not tying up too much of your business’ liquidity in real estate.

Plan on Investing Not Only Money, but Time

Not only will you need to spend a lot of time doing due diligence before buying property, but you will want to be or have to be hands-on after the purchase. Particularly if you are buying commercial property that will have to be let to other tenants, make sure to make frequent site visits and schedule routine inspections.

Team of Experts

In addition to an experienced real estate attorney who can help advise you and protect your interests, consider working with a knowledgeable real estate expert who can help you analyze real estate market trends and other pertinent issues, as well as a tax expert who can outline and help navigate the tax implications associated with owning commercial real estate.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.