Many Miami residents do their best to cut costs and be as efficient as possible in both their personal and professional lives. While these principles undoubtedly have merit when applied to certain situations, they are not always appropriate, such as when a person is involved in an important commercial real estate transaction.
One key component of a real estate transaction is drafting a purchase agreement. Often times, it can be tempting to use a preprinted form in order to accomplish this or other real estate transactions, as these forms can cut down on the time and expense necessary to complete the deal. However, the decision to use a preprinted form can backfire and end up costing the person far more in the long run, when the form does not include the proper provisions for the transaction.
Each real estate situation is different, and these differences may warrant having different contracts drafted in each case as well. Seemingly minor distinctions can end up having huge ramifications, making it all the more important to have a well-drafted agreement that takes these distinctions into account.
For example, when a preprinted form is used, or when a previous contract is simply modified to fit the new deal, it might include exculpatory clauses that limit or shift liability from one party to another. The provision might call on one party to agree to indemnify the other party in the event of a claim or if a loss is sustained.
Courts often enforce these exculpatory clauses and indemnification provisions. Thus, if a third party makes a claim, an individual might have unwittingly agreed to defend the other party to the contract against that third party’s claim, and to pay any damages awarded against the other party.
This could result in potentially hundreds of thousands of dollars of loss, if not more, simply because a party sought to cut corners when the contract was drafted. In light of these high stakes, individuals and businesses should understand what is important to them in each real estate deal, and how a contract can be drafted to account for these issues in each specific case.
Source: The Florida Bar Journal, “The Great Escape: How to draft exculpatory clauses that limit or extinguish liability,” Steven B. Lesser, Nov. 2001