Archives for posts with tag: contract

Premises Liability

Of prime importance to property owners and occupiers (tenants) is liability for damages to persons or property which occur on the owner’s or occupier’s property. Ownership or control of the premises upon which the damages occurred by itself will not create liability for the owner or occupier.  There also must exist a duty from the owner or occupier to the damaged person or property.  Also, control may be established through a showing of actual control or a right to control the area in which the damage occurred.  The control must relate to the activity that caused the injury complained of before a duty will exist.  Areas beyond the limits of an owner’s or occupier’s control will not establish such a duty.

Chapter 95 of the Texas Civil Practices & Remedies Code governs damage claims accruing on or after September 1, 1996, arising from negligent construction activities. A thorough discussion of that Chapter is well beyond the scope of this article.

In addition to control, an owner’s or occupier’s duty to a party will be determined by the legal status of that party. A party may be considered a trespasser, licensee or invitee.  A “trespasser” is someone who has no legal right to be on the property.  A “licensee” is a person who is present on the property with the permission of the owner or occupier, but for whom the owner or occupier has no business relationship.  A licensee is present on the property for his or her benefit only, and not that of the owner or occupier.  On the other hand, an “invitee” has a present business relationship with the owner or occupier and is present on the property for the mutual benefit of both parties.  A licensee or invitee may become a trespasser if his or her occupancy exceeds the scope of the rights granted to them.

Typically, owners and occupiers owe trespassers no duties other than to not injure them willfully, wantonly or through gross negligence. This has been the common law rule in Texas for many years, and has been codified in Section 75.007(b) of the Texas Civil Practices & Remedies Code.  For licensees, owners and occupiers owe the same duties that are owed to trespassers, and the additional duty to use ordinary care to make reasonably safe and adequately warn of dangerous conditions of which the owner or occupier is aware, but the licensee is not.  Actual instead of constructive knowledge of the dangerous condition by the owner or occupier is required.  Owners and occupiers are additionally responsible to invitees for their active negligence.  With respect to agricultural or recreational activities, Chapter 75 of the Texas Civil Practices & Remedies Code provides special protections to land owners engaged in such activities.

Texas courts have divided invitees into 2 categories: “public invitees” and “business visitors”. Public invitees are people who enter premises which are generally open to the public, such as governmental facilities and parks.  A business or merchant impliedly is “inviting” the public into its place of business.  Contractors, employees, and public servants are distinct categories of invitees.  By way of the invitation to the public, all entrants into those premises expect to be in a safe environment.  As such, owners and occupiers owe invitees the duty to exercise ordinary care to keep the premises reasonably safe, including the duty to inspect and discover latent defects, make safe any defects, or warn the invitees of the same.  For invitees, an owner or occupier is charged with any actual or constructive knowledge of the condition of the premises (i.e., conditions that the owner or occupier should have known of regardless of actual knowledge), and has a duty to make sure their invitees are reasonably safe from any such dangerous conditions or adequately warn the invitee of such conditions.

Even where a duty exists on an owner or occupier to provide a safe premises, liability will only occur where the breach of such duty proximately causes damages to the third party. Proximate cause is made up of two separate elements.  The first being “cause in fact”, which means that the negligent act or omission was a substantial reason that the injury occurred and without which, the injury would not have occurred.  The second element is “foreseeability”, which means that an ordinary and reasonably prudent person (which my first year contract law professor described as “Ward Cleaver”—Baby Boomers and Gen-Xers will understand) should have anticipated that such act or omission would result in such damage or injury.  These rules are general in nature, and several special situations have modified versions of these rules.  For example, premises liability relating to children, disabled persons, elevators and escalators, sporting events, and animals, each have modified rules relating to liability to the premises owner or occupier.

Under certain circumstances, an owner or occupier may be responsible for acts of third parties. The same rules as above apply for a third party act as for the owner’s or occupier’s direct negligence.  There must be a duty, a breach of that duty, and such breach proximately caused the injured party’s damages.  Most premises liability situations involving third parties are determined by proximate cause.  However, a third party’s act or omission may be a superseding act, breaking the chain of causation between the premises owner’s or occupier’s conduct.  A “superseding act” is an outside force that intervenes in a chain of events to cause an outcome that otherwise would not have occurred.  A superseding act can relieve an owner or occupier from liability relating to that act.

The criminal act of a third party is a common type of superseding act which may prevent the owner or occupier from becoming liable for an injury occurring on the premises. However, there are situations where an owner or occupier has been held responsible even where the criminal acts of a third party were involved.  In situations where such conduct is foreseeable and unreasonable, courts have imposed liability on the premises owner or occupier.

Employers have a duty to provide a safe workplace for its employees. Owners and occupiers have a duty to follow laws and ordinances which relate to safety of the premises, and the failure to follow such laws and ordinances may be considered to be per-se negligence.  Where an area or place has had so much criminal activity that has resulted in damage or injury to persons in and around such area, a premises owner or occupier may have a duty to protect its invitees against such dangers.  Note, however, that employers typically do not have a duty to warn an employee of conditions that are commonly known or already appreciated by the employee.  Of course, such duties will necessarily be affected by whether Worker’s Compensation insurance exists or not.

The principles underlying premises liability are in most instances purely fact driven. The analysis can be complicated, particularly when there may be more than one cause of the damage or injury or a superseding act.  Owners and occupiers of real property should always take advantage of liability insurance which will cover any negligence found against such owner or occupier, as well as provide the owner or occupier with a defense (attorney) against the prosecution of such claims.

Scott Alagood is board certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization and can be reached at alagood@dentonlaw.com or http://www.dentonlaw.com.

 

Alagood & Cartwright Shake Hands

Whether looking to sell or buy a business, certain issues should be taken into consideration.  First, it is important to determine what type of business organization is involved.  These include sole proprietorships, partnerships (general and limited), corporations, and limited liability companies.

A qualified tax advisor (CPA or tax attorney) should be consulted to determine the tax consequences resulting from the transaction.  The tax advisor may assist in determining how to structure the sale.  The seller needs to consider (1) how much, if any, gain or loss will be recognized by the seller; and (2) the character of the gain or loss as ordinary or capital.  For the buyer, it is important that the purchase price be properly allocated among the assets or ownership interest purchased.  An allocation will establish the purchaser’s cost basis in the asset or ownership interest used for future taxable events such as determining gain or loss and depreciation deductions and recaptures.

The type of sales transaction must be evaluated in order to determine the tax consequences and structure of the sale.  Sales of sole proprietorships involve the transfer of assets and the allocation of existing and future liabilities of the business.  With business organizations, the transaction may be structured as an asset purchase (similar to the sole proprietorship) or a sale of the ownership interest in the business entity (such as stock, membership interests, and partnership interests).  When a sale involves an ownership interest, careful consideration should be paid to the governing documents and public filings to ensure that the sale is allowed and does not trigger other agreements or restrictions which may interfere with the intended sale, such as superior rights of purchase by the entity or other owners of the entity.

For sales involving entities, the governing documents should be reviewed to determine who has the authority to approve the sale.  Financial records should be analyzed to determine what, if any, liabilities of the business that the purchaser will assume as well as valuing the business’ assets or intrinsic value.  A purchaser should carefully consider how an entity adheres (or fails to adhere) to the formalities associated with operating as a business organization.  In some instances, failure to adhere to these formalities may be used by a court to disregard the entity to place liability directly with the owner.

The purchaser may want a covenant by the seller not to compete in the same type of business being sold for a stated time and area following the sale.  There are strict limitations on the enforcement of “covenants not to compete”.  Parties are well advised to retain a qualified attorney to document the agreement.  If the purchaser wants to retain any of the seller’s employees following the sale, then employment agreements and retirement plans must also be addressed, particularly for key employees.  It may be important to negotiate covenants not to compete with key employees as well.  For certain businesses, intangible property rights may be a significant reason that the business is being acquired.  These include copyrights, trademarks, service marks, and trade names.

The parties may use contractual indemnification provisions to allocate liabilities of the business.  However, without assurance that there is any funding underlying the contractual promises, such provisions may not provide the parties with any meaningful remedy.  A percentage of the purchase price may be withheld or additional sums placed in escrow for a specified period of time following closing to provide security for the parties’ indemnification promises.

Governmental regulations, private restrictions, and real estate issues must be considered.  Securities and antitrust laws may have to be addressed.  Franchise laws may apply to businesses which are subject to franchise agreements.  Businesses such as bars and restaurants must deal with licensing and permitting issues with the Texas Alcoholic Beverage Commission and local health departments.  Unemployment compensation, insurance, and workman’s compensation may also need to be addressed.  Additional regulations or requirements associated with the purchase of a professional business to legally operate the business will have to be considered.

In short, there are numerous and sometimes complicated issues which may arise with the sale of a business.  Both sellers and purchasers should ensure that well qualified consultants are used to assist them with the transaction.

R. Scott Alagood is board certified in Commercial and Residential Real Estate Law by the Texas Board of Specialization and can be reached at alagood@dentonlaw.com or http://www.dentonlaw.com.

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