At the same time, there is a concern that being overly meticulous in correcting a contract can frustrate opposing counsel and, by extension, the counterparty to the contract and risk causing the deal to fall through. Therefore, an attorney reviewing a contract must understand what the language of the contract implies and determine whether such implication could be problematic for his client in the event of a dispute.

Jacobs PC recently dealt with such a situation when one of our clients was executing a lease renewal with a new guaranty agreement. The purpose of the new guaranty was to allow our client to be absolved of personal liability if he gives advanced notice to the landlord of his intent to have his entity surrender possession of the property. However, such a surrender would be ineffective to terminate any of our client’s entity’s obligations under the lease, rather the client’s entity would still be on the hook for its premature termination of the lease.

However, the language of the proposed guaranty agreement did not clearly express this intent.  It required our client to surrender the property “pursuant to the Lease.”  Under the lease, the only situations in which there was a “surrendering” of the property were: (1) upon the expiration of the lease; or (2) upon a default of the landlord or the tenant. In those events, the property was required to be in good order and condition, ordinary wear and tear excepted, and cleared of all of the tenant’s belongings.

Presumably, the drafter intended that the property be left in the condition that it would be required to be in if surrendered pursuant to the lease.  However, the plain reading of the contract term required that the property needed to be surrendered “pursuant” to the lease, meaning in a manner permitted under the lease.  Thus, as written, the new guaranty agreement would not necessarily have accomplished the intent of the parties (to the detriment of our client).

In reviewing the possible meanings of the word “pursuant”, I discovered that one of Black’s Law Dictionary’s definitions for “pursuant” is “in compliance with”.  Arguably, in accordance with this definition, the contract term should be read to mean that the surrender of the premises must be done in a manner that would otherwise be compliant with the lease, namely that the premises be in the conditions required for a surrender under the lease.

However, case law that has considered this definition has still held that the term “pursuant” always implies that whatever action is to be taken (in this context the surrender of the property) is one that has been discussed in the document that action is required to be “pursuant to”, and not merely that the action does not violate anything in that document and is therefore compliant with it. [1]

Needless to say, we reworded the clause to avoid any potential confusion.

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[1] See Gulf Islands Leasing, Inc. v. Bombardier Cap. Inc., No. 02 CIV. 2839 (WHP), 2006 WL 314523, at *4 (S.D.N.Y. Feb. 10, 2006) (holding undefined term "purchases options" exercised pursuant to the Relevant Purchase Documents includes only those purchase options set forth or authorized by those Documents).