Arthur R. Lehman, L.L.C.

Breach of contract over commission for hotel leads to lawsuit

Real estate deals can often be complex with various disagreements that arise once the business contracts are agreed to. When there are development contracts and the details become muddled, it is possible that the contract dispute can lead to litigation if the issues can't be settled. While neither side wants an agreed upon deal to go sour to the point where it's necessary to file suit, if the situation is unsalvageable, sometimes the only option is to pursue satisfaction via legal means. In real estate, this is a common problem especially when it comes to hotel and resort development.

A $1 million lawsuit has been filed in New York due to a developer who had planned to build a hotel in Bermuda allegedly committed breach of contract. The New York-based group who had planned the hotel alleges that a hotel company agreed to a loan of $18 million for the project, but didn't pay the company an agreed upon commission of $900,000. They are seeking a jury trial for this case. The legal filing made late in 2014 claims that there was a debt and equity advisory agreement with the developer and, after various financial maneuverings to further the agreement, the commission was not paid when it was supposed to have been.

When an agreement is reached, all are hoping to have their goals met. With business, the best case scenario is that everyone comes out ahead and fulfills their part of the bargain. Unfortunately, that doesn't always happen and, for one reason or another, disputes arise. If there is a contract, it is important that all involved do their best to fulfill it. Depending on the circumstances, the disagreement could have to do with interpreting the contract, problems with employees, purchases, sales and commission. In certain instances, litigation is the only tactic left to ensure that the proper fees are paid on time.

With this case, a company had agreed to build a hotel and made an agreement for a loan to fund the project. The commission that was meant to be paid to a New York-based company was not completed and a legal filing has resulted. When there is an alleged breach of contract such as this in any business deal, the wisest course of action if no solution can be agreed upon is to make sure the parties understand their legal rights and options.

Source: The Royal Gazette, "Developer faces $1m lawsuit over alleged contract breach," Owain Johnston Barnes, Jan. 3, 2015

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