What was the most profitable contractual loophole in history? Truthfully, I really don’t know if this was the most profitable or the biggest, but it was impressive. The question for me is: was it a loophole or good negotiating by someone with the ability to surmise past the obvious? I tend to give the negotiator credit for talent and foresight.
The title question was posed in an article on mentalfloss.com. It brings to mind the importance of language in contracts, and in real estate we deal with contracts all day long. The story as told is about a couple who owned a basketball team in the old American Basketball Association (ABA).
When the NBA merged with the ABA, 4 of the ABA teams went on to become NBA teams, while 2 teams were bought out. The first team owner accepted a $3 million payout. This was 1976, so that was a big number indeed.
The second team owner accepted a $2.2 million payout with a 2% share of TV revenues in perpetuity. But here is what is really interesting, rather than stick with the conventional definition of TV, the attorney negotiated a broadening of the definition of TV. Essentially the owners of that little ABA team became 2% partners with the Nets, Nuggets and Spurs. It was one sentence that no one thought much about.
Language is important in contracts; it just might make you a billionaire. Language is just as important in legislation and regulation. Language might end up limiting your right to property, due process or your ability to conduct your business in the way you wish.