Re: Example - Posted by JPiper
Posted by JPiper on January 21, 1999 at 17:43:55:
You have to love these assignment discussions. Soon we?re all going to have these down pat. Anywhere here?s some further thoughts.
I think Stacy?s clause in his contract is a good one. To me this would be sufficient for a deal that was all cash, or where the buyer obtained a new loan. Along with this, my contract limits my liability under the contract to the amount of the earnest money deposit, and is written in the name of a corporation. These two clauses further serve to limit the potential consequences of the contract coming apart.
I also like the basic idea expressed in Stacy?s assignment agreement, although my preference is to further embellish that basic idea?..that the assignee agrees to hold me harmless from various consequences under the contract.
There is a circumstance where I use a separate release of liability document that the seller would sign. That circumstance is where the contract contains owner financing provisions of any type, where I am assigning. The other circumstance is a lease/option assignment. What these two forms of financing have in common is their ongoing liability.
I think it?s possible that Stacy?s clause may well be sufficient protection even in these circumstances. However what is true in these circumstances is that you?re attempting to have someone agree to accept a third party who will have an ongoing liability to perform?..all without the seller being aware of the assignee?s qualifications to perform that liability. I?m not personally comfortable with this. I can imagine a set of circumstances where a seller would later claim that he didn?t understand the ramifications of his agreement with one of these clauses, that he was naïve, that the buyer was a sophisticated professional who didn?t set forth the ?whole? story as it pertained to this clause. I can see a court ruling in his favor.
Has it happened? I don?t have personal knowledge of it. However my preference is to be overly conservative in this type of transaction. Again, what I?m referring to is an assignment which includes owner finance or is a lease/option assignment.
I don?t use a separate release of liability in the case of cash transactions or new loan transactions.