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A Handy Tandy Guarantee
by Ron Davis

An Illinois shopping center owner may finally receive restitution from a major corporation that guaranteed the lease of one of the centerís tenants.

The shopping center, located in the Chicago area, had leased space to the tenant, Color Tile of Illinois, Inc., since 1975. And the corporation that guaranteed the lease is Tandy Corp. (now RadioShack Corp.), which has apparently failed in its bid to avoid that responsibility through a legal technicality.

Details of the case show that under the terms of its lease, Color Tile was able to renew its tenancy in 1995, after the initial 20-year term expired. But a requirement for renewal was timeliness. The lease stated that the shopping center owner had to receive notice of renewal at least six months prior to the lease expiration date. And Color Tile was two days late in sending its written notice for renewal.

The shopping center owner nevertheless accepted the request for renewal and extended the lease. Soon after that, however, Color Tile declared bankruptcy and was unable to meet its lease requirements.

The shopping center owner eventually sued Tandy, as guarantor, to force it to honor the lease provisions, plus pay $50,000 for any breach of the guarantee.

Tandy responded that Color Tileís failure to exercise its option to extend the lease in a timely manner resulted in a default. In other words, Tandy argued, its obligation as guarantor ended when the deadline passed for Color Tile to notify the shopping center of its plans to renew their lease.

The shopping center owner countered that the deviation from the terms of the lease was so minor that it did not result in a release of Tandyís commitment under the guarantee.

An Illinois court decided in favor of Tandy, however, agreeing that its guarantee of the lease ended when the shopping center owner failed to strictly adhere to the lease term provisions. The shopping center owner appealed.

An Illinois appellate court reversed the ruling favoring Tandy, explaining, "The fact that the notice provision of the guarantee does not specifically refer to the waiver of Color Tileís strict compliance with the lease terms ... is of no moment. We know of no rule which requires that a waiver-of-defense provision in a guarantee specifically itemize each defense which is waived. We believe that Tandy clearly and unambiguously agreed to be bound by its guarantee, notwithstanding the fact that the shopping center owner waived a condition of the lease." (T.C.T. Building Partnership v. Tandy Corp., 751 N.E.2d 135 [Ill.App. 1 Dist. 2001])

Decision: July 2001
Published: October 2001



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