Surviving Mahler Symphonies and Contract Terminations
Recently, the New York Philharmonic’s music director, Jaap van Zweden injured his shoulder and wasn’t able to conduct the orchestra when it performed Mahler’s Sixth Symphony. Simone Young, a well-established, female, Australian conductor came to the rescue, and with short notice, conducted the Philharmonic for the first time in twenty years.
A last-minute pinch hit is impressive for any conductor. It is even more impressive when the performance is of Mahler’s Sixth Symphony. At 90 minutes in length, Mahler’s Sixth is a true endurance piece. Comprising four movements, the last movement alone takes 30 minutes to perform. Performance of a symphony of that length may leave orchestra musicians and conductors dripping in sweat as if they had just finished the New York Marathon, rather than played in the New York Philharmonic.
Mahler’s Sixth isn’t even the longest composition written by this composer, who is noted for his lengthy symphonies. That honor goes to Mahler’s Third Symphony, which can take up to 105 minutes to perform.
My longest symphonic performance was Mahler’s Fifth Symphony, which I performed when I was a high school senior. At 65-70 minutes to perform, Mahler’s Fifth was an ambitious undertaking for teenage musicians, but somehow, we survived.
Although surviving a symphonic performance or running a marathon is synonymous with accomplishing a huge feat, survival has a different meaning in contracts.
How do Contracts End?
Although Mahler symphonies might seem to go on forever, they do eventually end when the orchestra plays the last note in the last movement. Contracts end, also. However, the end of a contract isn’t always preordained like it is for a symphony.
A lease agreement might have a preestablished ending if it is for a specific number of years. The lease ends automatically at the end of the term if the parties do nothing to extend it.
Other contracts don’t have a preestablished termination date. For instance, when people subscribe to a video streaming service, they have a month-to-month arrangement, which will continue until one party ends it. The service can cancel the contract if the subscriber doesn’t pay, and subscribers might decide that they no longer want video streaming and cancel the contract.
Real estate contracts usually have both an optional termination and an automatic ending. Purchasers usually have time to inspect the property and can terminate the contract if their inspections reveal flaws that make the acquisition unattractive. Real estate contracts also have a preestablished ending when the buyer closes on the purchase.
What Does it Mean to “Survive” a Contract Termination or Closing?
Normally, when a contract ends, the parties’ obligations to each other end too. But sometimes parties to a contract want to end a contractual relationship but have some of their contractual obligations continue after the relationship is over. When that happens, we say those obligations “survive” the termination of the contract.
Sometimes, the terms that survive the end of the contract will vary depending upon why the contract ended. Because real estate contracts usually have both a fixed ending date (the closing) and the ability for the parties to terminate their relationship for other reasons, they provide good case studies for examining survival clauses in contracts.
In a real estate contract, the parties frequently want these terms to survive the termination of the contract without the buyer purchasing the property:
Confidentiality provisions requiring the buyer to keep the seller’s private business information or trade secrets confidential.
Non-solicitation provisions prohibiting the buyer from recruiting the seller’s employees or tenants.
Indemnification provisions under which the buyer must compensate the seller for damage it causes during its inspection
The same parties usually want different or additional terms to survive the termination when the buyer closes on the purchase. Some terms which commonly survive the closing include:
Proration provisions that enable the parties to allocate operating expenses and taxes when the parties don’t have the exact dollar amounts at closing
Indemnification provisions under which each party must compensate the other for expenses or damages that occurred during their respective ownership of the property
Claims arising out of inaccuracy of the seller’s representations and warranties about the property
Indemnification for claims for broker commissions which weren’t disclosed in the real estate contract
Non-competition clauses which prevent the seller from competing with the buyer for a period of time after the closing
Although these are some of the typical provisions which will survive the end of the contract, the list will be as unique as each property and the contracting parties.
Incorporating Survival Terms into a Contract
Commonly, attorneys simply add “this section shall survive the closing or termination of this agreement” at the end of every section which the parties want to survive. This makes for easier contract drafting, since the parties will be thinking about the post-closing nature of the obligation when writing it. However, this method can also make it more difficult for parties easily to verify their post-termination obligations.
That’s why I frequently prefer to put all of the “survival” information in one place. That can be in a general section at the end of the contract which references the sections which survive contract termination. That section also can include survival conditions, such as those listed below.
Although survival provisions may be included in a real estate contract, best practice is for the parties to also sign documents at closing memorializing these provisions. That’s because under common law, the real estate contract “merges” into the deed at closing.1 This might introduce ambiguity on their survival.
Because documents signed at closing are not at risk of merging into the deed, there is no question about the validity of survival of provisions included in such a document. The Merger Doctrine and Surviving the Closing, discusses the merger doctrine in real estate contracts.
Survival provisions frequently involve more than just listing which provisions will continue after the contract ends. Parties may want to limit those provisions or remedies available after the contract termination. Additions to survival terms might include:
Duration of the survival period. For non-solicitation or non-competition clauses, a deadline might be required for the clauses to be enforceable under state law.
Process for making post-termination claims, including arbitration clauses, notice and mediation requirements before a lawsuit can be filed, and consents to jurisdiction.
Contractual “statute of limitations,” which limits how long after the contract termination a claim can be filed.
Minimum claim amounts. Parties may not want to be nickel and dimed after a contract termination. Therefore, they may negotiate a “basket,” or minimum dollar value for post-termination claims.
Maximum post-termination liability. Many vendors try to limit their damages to the total amount paid under the contract. Liability caps are common in real estate contracts.
Liquidated (a fixed dollar amount of) damages may be included when post-termination matters include confidentiality or other provisions where actual damages from a breach might be difficult to determine.
Credit support for post-termination obligations. In real estate contracts the buyer may want solvent entity to back the seller’s post-closing obligations. How Holdbacks Affect Music and Real Estate Transactions and Fermatas, Grand Pauses, and Alternatives to Holdbacks in Real Estate Transactions discuss common post-closing credit support options.
Attorney fee provisions, which require the losing party in a claim or lawsuit to pay the winning party’s attorney fees.
Although these are some of the more common provisions, survival provisions should be tailored to the contract. Parties should consult with their attorneys regarding what survival provisions best meet their needs.
When Maestra Young conducted the New York Philharmonic’s performance of Mahler’s Sixth, she and the orchestra musicians demonstrated their ability to survive. But it was not Maestra Young’s first time working with the orchestra, nor will it be the last. She already was scheduled to conduct the Philharmonic in 2020 in what a less grueling program of Elgar, Britten, and Brett Dean compositions.
Although the end of a contract may seem like the end of the parties’ relationship, that is not always the case. Some contract terms need to survive termination of the contract or closing of a transaction. In those instances, the parties may need to continue to work together, even though their contractual relationship technically has ended.
By planning ahead and working with experienced attorneys to carefully craft contract survival provisions, the parties can make it more likely that their continued relationship will be as pleasant as being in the audience of a New York Philharmonic performance.
© 2019 by Elizabeth A. Whitman
Any references clients and their legal situations have been modified to protect client confidentiality
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