The case, Cattail Associates, Inc. v. Sass, involved a contract to purchase two undeveloped parcels of real estate that the purchaser intended to develop. The contract specifically provided that closing was to occur after governmental approval of a subdivision of the properties.
Standing alone, the provision with respect to closing constitutes a violation of the Rule Against Perpetuities under Maryland law. That is, because the contract contained no time limit within which subdivision approval must be granted, there was no assurance that the purchaser's interest in the properties "must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest." As a consequence, without more, the contract would not be enforceable.
However, the contract at issue had an addendum that contained a "savings provision." That is, one section of the addendum provided that:
The parties to this contract intend that it will be binding and legally valid upon them. In order to preclude any application of the Rule Against Perpetuities which would otherwise invalidate and nullify this contract, the parties agree that this contract shall expire, unless otherwise previously terminated, on the last day of the time period legally permitted by the Rule Against Perpetuities in the State of Maryland, in which case all deposits shall be promptly returned to the Buyer.Of course, even this provision was somewhat problematical since it was unclear who the measuring life or lives were intended to be. The Court interpreted the provision broadly, however, and stated that "the clear implication is that the sellers as a class should be considered the measuring lives."
I suppose that all's well that ends well, but I have a further question: Should all sales contracts have Rule Against Perpetuities savings provisions? If so, is it now malpractice in Maryland to draft a contract without such a provision? And, if it's not now malpractice in Maryland to draft a contract without a savings provision, when, if ever, does the requisite standard crystalize sufficiently that, if the savings provision is missing, the attorney's duty of due care has been breached?
This afternoon, right after reading Cattail Associates, I was reviewing a contract for the sale of a restaurant. Closing was to occur within a certain period after approval of the transfer of the liquor license. One of the changes that I suggested be made to the contract was to add a Rule Against Perpetuities savings provision.