Wayne and Mary Harrison challenged the validity of their gas lease with Cabot Oil & Gas, and Cabot claimed such challenge in the courts acted to repudiate the lease thus entitling it to relief which extended the term of the lease.  The case was tried in federal district court and reached the Court of Appeals. The federal district court awarded summary judgment in Cabot’s favor on the suit to invalidate the lease. That court ruled in Harrison’s favor holding “the law of this Commonwealth does not provide for equitable extensions of oil and gas leases under the circumstances.”  While the appeal to the Court of Appeals (Third Circuit) was pending, that court asked the PA Supreme Court to address this question:  “whether the primary term of an oil-and-gas lease should be equitably extended by the courts, where the lessor has pursued an unsuccessful lawsuit challenging the validity of the lease.”

Cabot argued it could not spend between $4M and $7M to develop a Marcellus Shale well, while it was tied up in court with a challenge to its lease. Cabot claimed it wanted the benefit of its bargain. Cabot asked the PA Supreme Court to join other states which have found meritless challenges to leases to be repudiations which warranted the application of equitable principles to extend the lease terms.  They contended Pennsylvania already recognizes all legal predicates to this equitable extension principle.

The Harrisons described the equitable-extension principle as nothing more than a “judicial affirmative action program” for oil and gas producing companies which “abuses landowners who have done nothing other than exercise their legal rights.”  They claimed the lease was not repudiated by filing the declaratory judgment action.

The Supreme Court first noted something more than a mere assertion of a challenge to the validity of a lease is required to be a breach, or anticipatory breach, of the contract. They noted that in the broader context of contracts, filing a declaratory judgment action does not constitute a refusal to perform.  Reflecting on the Harrisons assertions that the gas companies enjoy superior bargaining position in leasing activities, the Court pointed out that the companies were free to insert tolling language in their leases and did not do so.  The Court then held that the mere pursuit of declaratory relief does not amount to a repudiation of the lease and that Pennsylvania will not adopt a special approach to repudiation pertaining only to oil and gas leases.

See Harrison v. Cabot Oil & Gas Corporation, 75 MAP 2014, February 17, 2015

All we need is one more Real Estate Agent Notice…….   However, in a discussion yesterday, it became clear that it is very easy to confuse the subject of offer, counteroffer, counter counteroffer, E TC in real estate contract formation.  I know a lot of real estate agents will call the other agent and say “we have a deal.” Is there really a deal before both parties sign the final version of the contract, and those copies are in possession of both the buyer and seller?  Do we need a “NO-DEAL-NOTICE”  ?

Many people say this is not a problem because the Statute of Frauds requires real estate contracts to be in writing. That is true except under the circumstances where all parties testify they reached an agreement. The Statute of Frauds does not protect a seller who has entered into an oral contract and is willing to admit. It protects a seller who does not testify a contract exists. To make things even more complicated, the Statute of Frauds protects against the remedy of specific performance. In other words you can’t force somebody by an oral agreement to sell you their property. On the other hand if you can prove the contract, there are some cases which indicate you may be able to get contractual damages.

I have written a little notice that I think all real estate agents need to put in their signature line for all emails.  This notice should be given to all real estate buyers and sellers:

IMPORTANT NOTICE:

I am a real estate licensee.  Whether I represent the Buyers, or the Sellers, or neither, the following statement is applicable:   All offers to buy, and all acceptances of those offers, including counter-offers,  must be in writing signed by the Buyers and the Sellers, and are binding only when delivered to those parties.  I do not have the authority to make, or accept,  any offers or counter-offers. 

An interesting question was posed by a real estate licensee the other day.  Let’s look at the facts:

Agent 1 was driving the consumers around and pointed to a new community as they drove past its entrance.  Weeks later the consumers, without any recollection of the property, drove in and looked at the sample.  They met with the Sellers agent (Agent 2), who informed them she did not want to be a dual agent.  They met with the builder and the seller’s agent 20 or 30 times.  More than 250 e-mails were exchanged.  The plans for the home were changed by the builder, with the input from the agent and buyer numerous times.  Finally, the builder said “No more free work without a contract.”  The agent told the buyers to come to her office the next day to prepare the contract so they could have their attorney perform a review.   The next day a contract came in naming Agent 1 as buyers’ agent and demanding one half of the commission.   What portion of the commission is Agent 1 entitled to receive?

There are not many recent Pennsylvania decisions on this topic.  That is because almost all the disputes go to arbitration and never see a court room. There is some good authority from New York which I will examine.   First let’s try to remove some of the clutter from the facts that try to drive a decision by emotion rather than by law.

Every buyer is entitled to a buyer’s agent.  Is every buyer’s agent entitled to share in the commission paid to the seller’s agent?  It seems rather easy to get lost on the topic of being fair to the agent that writes the contract.  The concept of agency is (in my humble opinion) the wrong path to a just resolution.  Emotionally it seems attractive, but it does not follow the courts that have addressed the issue.

The real issue is who sold the house.  In legalese this is often stated as “Who was the efficient and procuring cause?”  The National Association of Realtors has a list of standards that apply to answer this question.  We know this: the buyers went knowing nothing of the property to actually buying it and living there.  It seems that the real test is to take all the facts and place them in one of two columns: one favoring the seller’s agent and one favoring Agent 1.  Some of those facts will have more weight, but that can be the subject of a mental adjustment.

Agent 1           Drove by entrance to community,     Prepare an Agreement of Sale

Agent 2 (Seller’s Agent)       Met with the buyers and showed them the community,   Met with the buyers and helped them pick a specific lot.       Met with buyers and helped them pick a specific model home.  Met with buyers and builder to develop changes to plans  (12 meetings).   E-Mails to and from the buyers about details of the home they were buying  (200+).  Discussions with the buyers about financing the project and a budget.   Meeting with the buyer to discuss price.

With  lists like this it is obviously easier to see who it was that sold the home.  That person is the procuring cause of the sale and is entitled to the commission UNLESS, the multi-list terms and conditions offer to pay a buyer’s agent regardless of procuring cause.

Home improvement contractors in Pennsylvania are subject to regulation. Homeowners often get confused about when the new law, known as the Home Improvement Consumer Protection Act (“HICPA”) applies.  Here is an excerpt from some Continuing Legal  Education materials we recently published that deals with this ACT. It is in outline form.  If you have more questions call us.

HICPA (the Home Improvement Consumer Protection Act 73 P.S. ¶ 517.1 et seq)

1. The Requirement of Registration – section 517.4 requires registration for anyone who performs home improvement work.
2. Home Improvement Contracts. The law provides that a home improvement contract is not valid and not enforceable unless:
   1. It is in writing and contains the contractor’s registration number.
   2. It is signed by the owner and the contractor.
   3. It contains the entire agreement between the parties and has all required notices attached.
   4. It contains the date of the transaction.
   5. It contains the name, street address (no P.O. Box numbers), and telephone number of the contractor.
   6. It contains the approximate starting date and completion date.
   7. It includes a description of the work, materials to be used and set of specifications which cannot be changed unless signed off on by the parties.
   8. It contains the total sale price.
   9. It contains a statement of the down money plus advances for purchase of special order materials. (Note deposits cannot exceed 33.33%)
   10. It includes the name, street address and telephone number of all subcontractors known as the date of signing.
   11. It obligates the contractor to maintain liability insurance with fixed limits.
   12. It contains the toll-free telephone number for the Bureau responsible for registration.
   13. It includes a notice of right of rescission for a period of three business days.
3. Additional provisions for home-improvement contracts:
   1. contracts which contained an arbitration clause must meet certain requirements including:
      1. the text must be in capital letters
      2. the text shall be printed in 12 point
      3. the text must appear on a separate page of paper from the rest of the contract.
      4. The text must contain a separate line for each of the parties to sign.
      5. The arbitration clause cannot be a one-way street.
      6. The text must clearly state where the decision of the arbitration is binding or whether or not it can be appealed to Common Pleas.
      7. The clause shall state whether the facts of the dispute and the decision are confidential.
   2. Voidable clauses. If any of the following clauses are in the contract the owner may elect to void the contract:
      1. a hold harmless clause
      2. a waiver of federal, state or local health life, safety or building code requirements.
      3. A confession of judgment clause (note this does not get you around other provisions in the law barring confession of judgment clauses and consumer transactions.)
      4. An assignment of wages or other compensation for services.
      5. A provision by which the owner agrees not to assert any claim or defense arising out of the contract
      6. a provision that the contractor shall be awarded attorney’s fees and costs
      7. a clause which relieves the contractor from liability for acts committed in the collection of payments or repossession of goods.
      8. A waiver of any rights under HICPA
      9. automatic renewal provisions.
4. Criminal Provisions – Home Improvement Fraud  It is a crime to engage in certain actions, enumerated below.  Where the dollar value exceeds $2,000.00, the grading is FELONY 3.
   1.  False or misleading statement to induce a contract
   2.  Receiving an advance payment and failing to perform.
   3.  Concealing the real name of the contractor.
   4.  Damaging property in order to induce the need for more work.
   5.  Misrepresenting ones self as connected with government or a utility.
   6.  Misrepresenting that an item is special order or misrepresenting the cost of a special order item.
   7.  Altering a home improvement contract without the consent of the consumer.
   8.   Publishing false or deceptive advertisements.
5.  Prohibited Acts.  In addition to the criminal acts, the following are prohibited:
   1.  Failing to register.
   2.  Failing to pay refunds under certain conditions including where no work has been done or more than 45 days of elapsed is the start date.
   3.  Promoting a certificate of occupancy as proof of performance when the document is false or performance is incomplete.
   4.  Using a completion certificate when you know or have reason to know the document or proof is false and it is used to secure funds either from the homeowner or a lender.
   5.  Abandoning or failing to perform without justification.
   6.  Deviate from or disregard plans and specifications.
   7.  Participating in the financing of a home improvement contract with knowledge that a monetary obligation will be created in excess of the actual price of the contract.
   8.  Advertising to perform home improvement services if you do not intend to perform the work at the charges advertised are offered.
   9.  Demanding or receiving a payment before the contract is signed.
   10.  Where the contract is for more than $1000, receiving a deposit in excess of 1/3, plus the cost of special order items.
   11.  While acting as a salesperson, failing to turn money over to the contractor.
   12.  After entering into a contract, changing the name of the contractor’s business, liability insurance information or address or any other identifying information in a fraudulent or deceptive manner likely to cause confusion or misunderstanding without advising the owner in writing.
6.  Unfair Trade Practices and Consumer Protection Law (UTPCPL). A violation of any of the provisions of HICPA is a violation of the UTPCPL. Treat it as though it were item xxii in the list of unfair trade practices. UTPCPL allows a recovery for treble damages (up to three times the amount of actual damages) or $100 per violation, whichever is greater.  Another remedy allowed by the UTPCPL is reasonable attorney’s fees, which may be awarded in addition to any other award, and which may be substantial.
7.  Contractor’s Saving Provision    Section 517.7 (g) of HICPA provides that nothing in the act shall preclude a contractor who has complied with subsection a, setting forth those items required to be in a contract, from recovering based on the reasonable value of the services performed. This section has recently been reviewed by the Superior and the Supreme Court, and rewritten. A simple reading of the language indicates that if you can’t enforce the contract, you can bring an action for unjust enrichment, providing you have a contract you can enforce. This obviously makes no sense.

•  In Durst v. Milroy Gen. Ctr  52 A 3d 357 (2012 Pa. Super) the homeowner filed preliminary objections to bar a quantum meruit claim by a contractor who had an oral contract in violation of HICPA.  The Superior Court held “that quasi-contract theories of recovery survive the HICPA.”  The Durst decision was based on the fact that the clear language of the statute did not prohibit a quantum meruit claim.
•  In Shafer Electric v. Mantia,  67 A.3d 8 (Pa. Super 2013)  the Superior Court followed Durst and held that a reading of the wording of the statute led to an absurd result which violated general principles of PA law. In this case, this panel of the Superior Court based its decision on statutory construction.
•  In  Shafer Electric v. Mantia  96 A.3d 989 (Pa. 2013),  the Supreme Court affirmed a decision of the Superior Court, on the basis of the holding in Durst v. Milroy, 52 A.3d 357 (2012 Pa. Super.), which held an action for unjust enrichment is available to a contractor even where there is no written contract complying with HICPA.  The Court got to the same result as the Superior Court, but not for the same reasons. The Shafer Electric holding is essentially consistent with the Restatement (Third) Restitution and Unjust Enrichment, sections 31 – 36 which address the subject of awarding restitution to a performing party who has no claim under his or her contract