Bipartisan Affordable Housing Bills Would Provide 2 Million Affordable Homes

There is some good news for affordable housing advocates in a time of political polarization and partisan rancor: strong bipartisan support in both the U.S. House of Representatives and the Senate for The Affordable Housing Credit Improvement Act (AHCIA), introduced earlier this year as S.1557 and H.R. 3238.

Advocates report that this legislation has broad bipartisan support and that nearly half of all members of Congress, members from both parties in both chambers have signed on a cosponsors of the legislation. Both of North Carolina’s Republican Senators, Ted Budd and Thom Tillis, have cosponsored the Senate bill and at least eight members of the House from the North Carolina delegation, 4 Democrats and 4 Republicans, are cosponsors of the House bill as of July 28, 2023.

The Affordable Housing Tax Credit Coalition claims that passing the AHCIA is “the single most important Congress can take to address our nation’s affordable housing supply crisis.” The Coalition estimates that nearly 2 million additional affordable homes could be financed in the U.S. over the next decade if Congress were to enact the primary unit financing provisions in the proposed law. Passing the new law also is estimated to generate 3 million jobs, $115 billion in additional tax revenue and $333 billion in wages and business income.

The AHCIA would also help address a critical affordable housing shortage in North Carolina. A Cato Institute study published in December 2022 notes that North Carolina needs 900,000 additional homes over the next 10 years to meet the demands of a growing population. Affordable housing and workforce housing is not only a housing issue, but an “access to talent issue.” A 2021 survey of local small businesses in western North Carolina noted by the Cato study emphasized the “pressing need for more affordable housing. Local businesses directly connected this issue to the challenges of being able to find workers and pay living wages.”

Members of the North Carolina General Assembly also have introduced a number of bills in the current legislative session to address the workforce housing crisis and to authorize cities and counties to provide for more workforce housing, inclusionary zoning for small housing units, cottage homes and accessory dwelling units. Legislation also would continue to fund the North Carolina Housing Finance Agency’s workforce housing loan program.

Read the Contract: It’s the Law!

I have often in my law practice advised my clients that the first rule of contracts is: “Read the contract!” Now, after a recent North Carolina Court of Appeals decision, I can emphatically say that it is their legal duty to read the contract before they sign it.

In Mann v. Huber Real Estate, Inc., an appeal arising out a case tried in Durham County, North Carolina (COA 22-956, decided June 20, 2023), the plaintiff, Galya Mann, filed suit for money damages against her Realtor (and other defendants, including the builder). This was a case of a residential real estate purchase of a newly-built home that went very wrong after the plaintiff closed on the deal and moved into her new home. The Court’s opinion stated the problem this way:

“After Plaintiff moved into the home, she discovered numerous latent defects, including improper lot grading and drainage, improper shingle and gutter installation, foundation cracks, no moisture barrier in the crawlspace, improper mounting of the HVAC, electrical issues, water in the crawl space, plumbing problems, and biological growth. The repairs to Plaintiff’s home were estimated to cost between $83,894.72 and $90,594.73.”

Ms. Mann sued the builder, the warranty company and her Realtor. Her claims against the Realtor were that he failed to exercise his fiduciary duty to her by failing to advise her concerning the builder’s pre-printed and “standard” sales contract provisions, including warranty disclaimers and limitations of warranty and liability. The plaintiff’s claim was that “she could rely solely on the Realtor’s representation that the sales contract was a ‘standard contract’ and [that she could] forego her own review of the contract.”  (Emphasis added.) She also claimed that her Realtor should have advised her to get legal advice about the contract before she signed it.

The Court’s majority (two judges in a three-judge panel) noted that a Realtor owes a fiduciary duty to the client, “to exercise reasonable care, skill, and diligence in the transaction of business entrusted to him, and he will be responsible to his principal for any loss resulting from his negligence in failing to do so.”  However, in this case, the Court’s majority determined that the Realtor’s reference to the builder’s sales contract as a “standard contract” in answer to Ms. Mann’s question about the contract did not amount to a breach of fiduciary duty. The Court affirmed the trial court’s grant of summary judgment dismissing the breach of fiduciary duty claim (and other claims) against the Realtor, thus absolving the Realtor from any liability in the case.

On this ruling against the plaintiff, the Court stated: “According to well-established North Carolina law, one who signs a paper writing is under a duty to ascertain its contents, and in the absence of a showing that he was willfully misled or misinformed . . .  as to these contents, or that they were kept from him in fraudulent opposition to his request, he is held to have signed with full knowledge and assent as to what is therein contained.”  (Emphasis added.)

The Court’s opinion further notes: “It is well-established in North Carolina that ‘[o]ne who signs a written contract without reading it, when he can do so understandably[,] is bound thereby unless the failure to read is justified by some special circumstances.’ . . . Here, Plaintiff has failed to present evidence that special circumstances absolved her of the duty to read the contract. Plaintiff thus has a positive duty to read the sales contract and her failure to do so ‘is a circumstance against which no relief may be had, either at law or in equity.'” (Emphasis added.)

One of the three judges in the Court of Appeals panel dissented in part, disagreeing with the majority’s decision on the fiduciary duty question.  The dissenting judge wrote that “I would hold that the trial court erred by granting summary judgment to Realtor on Plaintiff’s breach of fiduciary duty claim, because there is a genuine issue of fact [for a jury to find and decide] as to whether Realtor breached their fiduciary duty to Plaintiff regarding the contract between the builder and Plaintiff.”  The dissenting judge noted that expert testimony was given in the trial that if a buyer has questions about a contract, the Realtor’s duty is to refer the buyer to an attorney.  The dissenting judge stated that he believed that “boiler plate language” in the Realtor’s agreement with Ms. Mann was not sufficient to fulfill the Realtor’s fiduciary duty to advise Ms. Mann to get legal advice, and that “failing to advise her, verbally, at the time she signed the agreement, to seek legal counsel” was a breach of fiduciary duty, because she was questioning the form of the contract.

Ellinger Carr lawyers advise clients on all kinds of contracts, including real estate purchase contracts and builder’s construction contracts. We draft, negotiate and revise contracts for clients. Let us know if you need our advice and assistance on any contracts and transactions you are contemplating, and about any legal questions you may have about these transactions, and we will read and help you understand the contract before you sign.

North Carolina Housing Credit Awards Announced; $1.1 Billion in New Investment in Affordable Housing


More than $1 billion in new economic investment is coming soon to build and preserve affordable housing in North Carolina, according to Chris Austin, Director of Rental Investment for the North Carolina Housing Finance Agency.

Housing credits were awarded by the NCHFA to rental housing developers who submitted over 100 applications in a competition for low income housing tax credit allocations in 2020.  The awards announced last Friday, August 14, included 42 projects in 31 counties, supporting equity and debt financing for new construction or rehabilitation of 2,730 apartment units.  Awards also were made to 17 tax-exempt bond projects totaling 1,648 units.

Mr. Austin noted that awards made in January, June and last Friday by the agency “have made this a record-setting year for the number of awards (75), units produced (6,776), and the total development costs of the awards ($1.1 billion).”

This year’s awards include housing credits for developments for both new construction and rehabilitation of existing units.  The Ellinger Carr firm is honored to be part of the teams that will be working to provide more than 1,300 new and rehabilitated affordable housing units in 14 cities and towns in North Carolina.

Since 1973, the North Carolina Housing Finance Agency has financed nearly 300,000 homes and apartments, totaling $25 billion, with housing credit awards and agency loan financing.  The NCHFA is a self-supporting public agency.

The Ellinger Carr law firm advocates for affordable housing and supports clients in their development and rehabilitation of affordable housing in our State and elsewhere in the country.  The firm also expects to advise and participate in financing transactions as part of our ongoing relationship with the City of Raleigh and its Housing & Neighborhoods department with loans in support of affordable housing developments in Raleigh, including not only multifamily housing and community development,  but also adaptive reuse of historic structures and first time homebuyer programs and initiatives.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction specialists and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in affordable housing, commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at,  Sarah Goodin at, Heather McDowell at or Steven Carr at

Voting Rights and Responsibilities: Making Reasoned Choices

by Steven Carr, August 16, 2020

— “Come now, let us reason together . . .”  Isaiah 1:18 (King James Version).

In a season of racial unrest and civil rights protests that led to violence and death in American cities, 55 years ago, President Lyndon Johnson came to speak to an extraordinary joint session of the House of Representatives and the Senate.  He was seeking to persuade the Congress to adopt legislation that came to be called the Voting Rights Act of 1965.  The speech, delivered on March 15, 1965, occurred just a few days after the Selma “Bloody Sunday” march on March 6.

Historians note that Johnson often quoted the passage from Isaiah 1:18, a favorite Bible verse of his father, “Come now, let us reason together . . .” In his speech on March 15, Johnson alluded to the Isaiah verse, stating “I am grateful for this opportunity to come here tonight at the invitation of the leadership to reason with my friends, to give them my views, and to visit with my former colleagues.”  This was classic Johnson, and this speech was a classic and lyrical expression of what Johnson believed and what he strived to achieve as both a powerful Senate leader and as President.

At his inauguration earlier that year, his address was described as “a ringing call for national unity and noble deeds couched in almost biblical language.”  He declared that “the oath I have taken before you and before God is not mine alone but ours together. … For every generation there is a destiny. For some, history decides.  For this generation, the choice must be our own.”

In the March 15 speech, he returned to the themes of “the dignity of man and the destiny of democracy.”  In pressing for the Voting Rights Act, which had been rejected in the 1964 Civil Rights Act he signed into law the previous summer, Johnson was persuaded that Black Americans were being denied their right to vote and to register to vote by certain voting suppression practices in Southern states, and that Federal law was required to insure equal voting rights for all people and to affirm our country’s founding principle and purpose of equality of opportunity for all.

For President Johnson, this equality of opportunity meant that each citizen shall “share in freedom” — the opportunity to choose leaders, to educate our children, and to provide for our families “according to [each person’s] ability and . . . merits as a human being.” Johnson said: “Our fathers believed that if this noble view of the rights of man was to flourish, it must be rooted in democracy.  The most basic right of all was the right to choose your own leaders.  The history of this country, in large measure, is the history of the expansion of that right to all of our people.  Many of the issues of civil rights are very complex and most difficult.  But about this there can and should be no argument.  Every American must have an equal right to vote.  There is no reason which can excuse the denial of that right.  There is no duty which weighs more heavily on us than the duty we have to ensure that right.”

This month, we celebrate the achievement of voting rights protections for citizens of color 55 years ago.  We also remember and celebrate the right of women to vote, secured and ratified in our Constitution on August 18, but only 100 years ago.

And as we exercise our right to vote in the coming national and State elections, let us do so celebrating not only the right to vote, but also acknowledging and affirming our responsibility as citizens – to be knowledgeable and well-informed on the issues of our day, to make good and reasonable choices, and to seek to persuade each other and to achieve compromise and consensus on the best ways forward for safety, health, opportunity, economic prosperity, justice and peace for all Americans.

In this season of pandemic, racial unrest, anarchy and violence in American cities, and even now a new debate about voting and voting methods, this is also a time for all Americans — Democrats, Republicans, Independents, liberals, progressives, conservatives, libertarians – all of us, to come now to reason together.  In this time, we must choose, and we must come together in common cause.

We must summon the power of science, and reason, to find better and effective ways and technologies to detect the coronavirus with speedier and more effective testing, and to defeat the coronavirus with effective vaccines and cures.

We also all must come together, and reason together, to choose a better path and a better way of speaking with each other and dealing with each other — justly, compassionately, lawfully and respectfully.  As President Johnson did 55 years ago, we must speak and reason with each other, as fellow Americans and fellow citizens of the planet, for the dignity of humankind and for the destiny of democracy.  We must speak with each other and reason with each other, and we must choose peace, opportunity, and plenty, and security and safety on our streets and in our neighborhoods.  We must choose and strive together for peace, prosperity and good health among the community of nations and peoples all over the world.

We must demand that our elected leaders – 435 Representatives, 100 Senators, Governors, State and local representatives, and our President and Vice President — also must meet, exchange views and negotiate, compromise and reach consensus on the policies and the laws and the appropriations for technological advances for the greater good for all of us.   They must come together, and reason together, to do their jobs, and to serve us, and to help make us a more perfect union.

What does it mean “to reason together”?

In the law of North Carolina, contracting parties are expected to exercise their discretion “in a reasonable manner based on good faith and fair play.”  What does “reasonable” mean?  I read a lot of statutes and court decisions to get a practical definition, and sometimes I get good instruction on Sunday mornings.  I rely on my learned pastor for theology, religious instruction, and often for new insights gained from her skillful use of words.  In one of her recent sermons, she noted that “to be reasonable is to be logically consistent.” That rings true. But what does “logically consistent” mean?  Logic is defined as a branch of philosophy concerned with analyzing the patterns of reasoning by which a conclusion is properly drawn from a set of premises, or a system or principles of argument or reasoning.

The word logic derives from the Greek logikos, concerning speech or reasoning.  The root of logikos is logos, the Greek word for “word” and, in theological uses the word logos, as used in the first chapter of the Gospel of John describes the divine word – or reason incarnate.  The word is akin to legein – to choose, gather, recount, tell over, or speak.   Thus, to be reasonable is to choose words carefully, and to draw good conclusions from an agreed upon set of facts or premises.

And “to reason” means “to think logically” and “to draw logical conclusions from facts or premises” and “to urge or seek to persuade by reasoning.”

President Johnson once said: “the only real power available to the leader is the power of persuasion.” Although his record as president was marred by the quagmire of the war in Vietnam, Johnson was often powerfully persuasive and effective in achieving compromise and practicing consensus politics, to advance the causes of civil rights, voting rights, a war on poverty, and forward progress on his vision of justice, liberty, unity, and a Great Society.

As our national election in 2020 approaches, and the opinion polls continue to show how divided we all are, and in the midst of mask mandates and social distancing guidelines, is it realistic to expect that we can come together and reason together?  Are we so hopelessly divided and entrenched in our viewpoints and our beliefs that we have no realistic chance of achieving consensus and persuading anyone of anything?  I don’t know, for sure, but I believe we must try.  I believe in the promise of this country, and in the blessings we can secure for all Americans if we come together to move forward together and to defeat our common enemies:  disease, poverty, and ignorance.

In that 1965 speech, President Johnson implored his friends and former colleagues: “I say to all of you here, and to all in the Nation tonight, that those who appeal to you to hold on to the past do so at the cost of denying you your future.  This great, rich, restless country can offer opportunity and education and hope to all. … This is one Nation.  What happens in Selma or in Cincinnati is a matter of legitimate concern to every American. … In Selma as everywhere we seek and pray for peace.  We seek order.  We seek unity.”

Biblical scholars say that the Isaiah passage that Johnson was fond of is better translated as a warning and an injunction of the prophet from God – “come, let’s settle the matter.”  Humankind are on trial, and God is patiently reaching out and asking his covenant people to choose to obey and to leave behind our idols and our mistakes and our bad decisions.  I think this translation works well for a renewal of the American covenant also.

Let us choose to settle the matter.  Let us choose to seek each other out, and to learn from, and to listen to, each other, to employ science and to make good decisions, in order to preserve and unify and rescue our country and our fellow citizens.  Let us learn, and reason, and seek to persuade each other and our elected leaders about how we can best achieve the most powerful and effective solutions to common problems and agree on the most effective ways to defeat our common enemies.


Home Work: Building Affordable Housing in Wake County and North Carolina; Renters at Risk

North Carolina and Wake County are continuing to keep pace and to set the pace of residential real estate development in spite of months of coronavirus pandemic, and we are bucking the reported slowdown of affordable housing construction elsewhere in the United States, as reported by a recent Bloomberg News article (July 30, 2020), “COVID-19 is Killing Affordable Housing, Just as It’s Needed Most.”

The Raleigh News & Observer reported in mid-July 2020 on a number of upcoming and proposed residential developments in Wake County, including both market-rate and affordable housing properties.    The article notes that the Raleigh City Council approved a rezoning request from Raleigh affordable housing developer DHIC and senior home developer Presbyterian Homes to redevelop the closed Memorial Presbyterian Church at 1950 New Bern Avenue in east Raleigh.  Construction is expected to commence in early 2021 with 150 units for seniors making 60% or less of area median income.

The Crenshaw Trace development is another senior affordable housing development in Wake Forest, slated to begin construction later this summer by the Taft-Mills Group, a Greenville, North Carolina developer, with 68 units (36 one-bedroom and 32 two-bedroom units) for residents over 55 making 30% to 80% of area median income.  Rents will range from $476 to $1,086, according to the N&O report, and will be supported by a Wake County loan of $731,000.  Wake County Commissioners approved loan funding of up to $12.6 million last April for the building of affordable housing, including the Crenshaw Trace development.

The Taft-Mills Group also expects to commence construction later this summer of the Walnut Trace development, a 180-unit development in 6 buildings on Rock Quarry Road in southeast Raleigh, serving families with 60% of area median income.   The Walnut Trace development will be financed by low income housing tax credit equity funding, Raleigh Housing Authority tax exempt and taxable multifamily housing revenue bonds up to $23 million, and an affordable housing loan of $2,250,000 from the City of Raleigh.

The Taft-Mills Group also recently closed and will commence construction of the Farrington Trace development in Greenville, Pitt County, 80 apartment units serving families with incomes at 60% or less of area median income.  This development is financed with 9% low income housing tax credit equity financing, and loans from the North Carolina Housing Finance Agency.

Renters at Risk

According to the National Low Income Housing Coalition and their Out of Reach 2020 Report, 35% of nearly 4 million households in North Carolina are renters’ households.  The Report states that the North Carolina worker earning an average renter wage of $15.92 per hour could afford a rent of $828 per month, but the fair market rent for a two-bedroom apartment is $919, and thus “out of reach” for many North Carolinians.

According to the Bloomberg News article, affordable housing advocates are also concerned that the COVID-19 pandemic will not only slow down construction of new affordable housing units, but that many people now unemployed due to the pandemic face eviction because they can’t pay the rent.  Pending legislation currently being debated and negotiated in Congress may extend the CARES Act eviction moratorium, which expired on July 25, and provide additional housing and financial assistance to unemployed and other struggling Americans, and to State and local governments to continue funding affordable housing initiatives.   One estimate is that as many as 40% of Americans may be at risk of eviction for non-payment of rent if the eviction moratorium is not extended and renters are unable to return to work.

Ellinger Carr lawyers are affordable housing advocates and we are honored and proud to serve our nonprofit and for-profit developer clients, and as counsel in support of affordable housing and community development initiatives for the City of Raleigh and the City of Greensboro, and other housing professionals and organizations.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at, Heather McDowell at,  Sarah Goodin at and Steven Carr at


Home Work – North Carolina Legislators Addressing Foreclosure, Rental and Utility Emergency Assistance, and Workforce Housing

June 11, 2020

Housing MattersAmid news of more than 1.5 million new jobless claimants in the United States this week filing for unemployment assistance, and word that 20 or more States, including North Carolina, are experiencing a new spike in COVID-19 cases, North Carolina legislative leaders are responding with legislation that will provide emergency grant assistance to keep people in their homes, with foreclosure, rental assistance and help with utility bills.

House Bill 1200, introduced and led by House Republican Conference Chair John Szoka, a State Representative from Fayetteville, Cumberland County, would provide $200 million in funding to the North Carolina Housing Finance Agency to implement programs to assist individuals facing foreclosure or eviction and needing assistance making utility payments due to financial hardship resulting from the COVID-19 pandemic.

We support and encourage North Carolina legislators to enact this legislation to empower the NCHFA to provide these emergency grants and assistance to homeowners and renters adversely impacted by the pandemic and the economic fallout and job losses.

We are also monitoring and we support passage of House Bill 1208 which would provide an additional $20 million in funding for the North Carolina Housing Finance Agency for the Workforce Housing Loan Program.  If this legislation is passed, the Loan Program funds appropriated would be allocated during the 2020 housing credit award cycle.  These funds are vital to supporting and increasing the number of affordable rental workforce housing units available to low and moderate income individuals and families in North Carolina. This bill is sponsored by Representative Donny Lambeth, R-District 75, Winston-Salem/Forsyth County, and may be on the legislative calendar this week.


Home Work – Affordable Housing Initiatives in the Carolinas

The great need of safe, decent and affordable housing is being addressed by legislators and city leaders in the Carolinas, and more work needs to be done.

The South Carolina General Assembly enacted and the South Carolina Governor signed into law the Workforce and Senior Affordable Housing Act on May 14, 2020.  This new law establishes a State affordable housing tax credit that will be available to help finance housing projects with restricted rents that do not exceed 30% of income, and providing for at least 40% of affordable apartments to be occupied by persons or families having incomes of 60% or less of area median income, and at least 20% of the units to be occupied by persons or families having incomes of 50% or less of area median income.

On Tuesday, June 2, 2020 the Raleigh City Council will discuss and vote on an $80 million Affordable Housing Bond, and a group of Raleigh faith communities, Congregations for Social Justice, is calling on the City Council and Raleigh citizens to support bond funding targeting the construction and rehabilitation of housing for Raleigh persons and families with incomes at or below 30% of area median income (AMI).  The group notes that AMI in Raleigh for a household of four people is currently $94,100, and 30% of AMI is $28,230, which is considered by the U.S. Department of Housing and Urban Development to be “extremely low income.”  A person earning $10 per hour for 40 hours per week earns $20,800 per year, which is 22% of AMI in Raleigh and Wake County.

Advocates of the affordable housing bond are recommending use of bond funds for support of low income housing tax credit gap financing for apartment units in the 30% or less AMI category.  In recent years, Wake County has estimated a need for some 17,000 apartment units for households with 30% or less of AMI, and 5,000 units in the 30% to 50% AMI range.  Other bond funds would be used for homeowner rehabilitation improvements and first time homebuyer downpayment assistance.

Ellinger Carr lawyers work with a number of clients, including nonprofit and for-profit affordable housing developers and with the cities of Raleigh and Greensboro on their community development and housing and neighborhoods initiatives to promote, preserve and sustain affordable housing in our hometown and across the Southeast, including North Carolina and South Carolina.  We support and are happy to see these important needs being addressed to serve families and seniors who need safe, decent and affordable homes.

Susan Ellinger advises Housing Authorities and Housing Executives

Susan Ellinger will be speaking and leading a housing law presentation on November 15, 2019 in Florence, South Carolina.  The Florence meeting is a gathering of the South Carolina Housing Authority Executive Directors.  Susan, a lawyer and Ellinger Carr founding member, is also former Housing Authority executive.  She will be advising the South Carolina executive directors on new developments in fair housing, domestic violence and requirements of the Violence Against Women Act,  due process rights, housing authority leases and lease enforcement, and training of Authority staff on all of these legal issues and matters.  Susan and other Ellinger Carr lawyers represent and advise Housing Authorities in North Carolina and South Carolina.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina. Providing safe, affordable housing for families, seniors and developmentally disabled persons has long been a part of the work of the Ellinger Carr law firm, in communities in the Carolinas, the Southeast and elsewhere in the United States.

Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana, Virginia and New York. For assistance in affordable housing, HUD financing, commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at, Heather McDowell at, Sarah Goodin at, or Steven Carr at

Housing Matters

Business Acquisitions from Start to Finish – helping clients buy and sell businesses

Steven Carr, one of the Ellinger Carr lawyers, will be a featured speaker and presenter at an upcoming seminar designed for lenders, loan officers, accountants, paralegals and lawyers on the topic of business acquisitions and helping clients buy and sell businesses.  The program is sponsored by the National Business Institute and will be conducted at the Holiday Inn North-Midtown in Raleigh on Monday, December 16.  For more information about the seminar, or to register for this program, call NBI at 800-930-6182 or log in at, or contact our office about how to register for the program.

Steven will be leading the discussions on structuring and drafting the acquisition agreement, both for equity interest purchases and asset purchases, and on the ethics of business acquisitions.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana, Virginia and New York.  For assistance in buying and selling a business, starting up a new business, acquiring commercial real estate and other corporate and business development matters, call 919-785-9998 or email Susan Ellinger at, Steven Carr at, Sarah Goodin at, and Heather McDowell at


Let’s be reasonable – the meaning of reasonableness – part 1


Let’s Be Reasonable – part 1

by Steven Carr

The happiness of your life depends upon the quality of your thoughts: therefore, guard accordingly, and take care that you entertain no notions unsuitable to virtue and reasonable nature. —Marcus Aurelius

Lawyers often use and encounter the words “reasonable” and “reasonably” in their drafts of contracts and in their arguments whether a party’s conduct or behavior met the standard of reasonableness under the circumstances, in matters of civil wrongdoing or criminal misconduct.  But what does it mean to be reasonable, or to act reasonably?

Years ago, when I proposed to use the word “reasonable” in a contract clause, a client accused me that this was just a lawyer’s meaningless “weasel” word, intended to be purposefully vague or indefinite, and to put off to a later day and to a later negotiation what the parties to a contract should discuss and decide to resolve a potential issue or problem.  The client was partly right.  If “weasel words” are a colloquial term for words or phrases used to avoid being forthright, or words that are inconclusive or vague, then I assured my client that the word is not a weasel word, and that I never intend to include words in contracts that are vague, unclear, or dishonest.  But, it is perfectly appropriate to use the word “reasonable” as a standard and a basis for future negotiations to resolve a problem that may arise, or a problem that the parties agree that they cannot resolve when they first come to a meeting of the minds on other contract terms and conditions, and they choose to discuss and resolve that problem later.

I sometimes borrow the joke, as I am reading other drafters’ words, that certain contract provisions “may be sufficiently vague as to be theologically significant.” Lacking formal seminary education, I don’t strive for theological significance or soul salvation in my contract drafting or negotiation efforts.  Instead, I seek clarity and choose plain, ordinary and simple words to achieve the client’s legal objectives, to clearly state contract duties and benefits, and to unambiguously allocate contract risks and responsibilities.

I rely on my learned pastor for theology, religious instruction, and often for new insights gained from her skillful use of words.  In one of her recent sermons, she noted that “to be reasonable is to be logically consistent.” That rings true. But what does “logically consistent” mean?  Logic is defined as a branch of philosophy concerned with analyzing the patterns of reasoning by which a conclusion is properly drawn from a set of premises, or a system or principles of argument or reasoning.  The word derives from the Greek logikos, concerning speech or reasoning.  The root of logikos is logos, the Greek word for “word” and, in theological uses the word logos, as used in the first chapter of the Gospel of John describes the divine word – or reason incarnate.  An online dictionary reports that the word is akin to legein – to choose, gather, recount, tell over, or speak.    Thus, to be reasonable is to choose words carefully and to draw good conclusions from an agreed upon set of facts or premises.

And “to reason” means “to think logically” and “to draw logical conclusions from facts or premises” and “to urge or seek to persuade by reasoning.”

So, why is “reasonable” a good and clear word to choose, and use, in contracts? In North Carolina, the legal standards for contracts include the exercise of discretion “in a reasonable manner based upon good faith and fair play.”  All contracts in North Carolina contain “an implied covenant of good faith and fair dealing that neither party will do anything [that] injures the right of the other to receive the benefits of the agreement.”  And, this requirement:  “[A] party who enters into an enforceable contract is required to act in good faith and to make reasonable efforts to perform his obligations under the agreement.”  Banyan GW, LLC v. Wayne Preparatory Academy Preparatory School, Inc., 822 S.E. 2d 791 (Table) (N.C. App. 2019) (citations omitted).

These legal standards hint at what reasonable means, but do not define it, except by reference to “good faith and fair dealing.”  “Good faith” is defined in the Uniform Commercial Code as “honesty in fact.” So, reasonable is generally understood to be action or conduct that is guided by honesty, fairness and the facts and circumstances of the particular situation.  In the Banyan case, the Court of Appeals was asked to analyze and determine what the parties meant by their use of the term “reasonable efforts” and whether the parties had made a “reasonable estimate of damages that would likely result from a default” if those efforts failed.  In Banyan, the Court noted that whether a liquidated damages amount agreed upon by the parties is a reasonable estimate of damages resulting from a default is a question of fact, and a party who seeks to invalidate a liquidated damages provision bears the burden of showing that the provision is unenforceable and unreasonable – because it is instead a penalty.

The Court of Appeals, following a “modern trend” enunciated by the North Carolina Supreme Court, and a long-standing fundamental principle of the freedom of contract in North Carolina jurisprudence, upheld the lower court’s summary judgment and an award to the plaintiff service provider of $500,000, the agreed liquidated damages amount stated in the contract.  The Court majority wrote, citing a 1917 decision:  “[T]he parties [to a contract], being informed as to the facts and circumstances, are better able than any one else to determine what would be a fair and reasonable compensation for a breach[.]”  The majority further noted:

[T]his Court does not possess the authority to save a party from a contract that — in hindsight — may seem ill-advised. Indeed, it is axiomatic that courts may not “relieve one who can read and write from liability upon a written contract, upon the ground that he did not understand the purport of the writing, or that he has made an improvident contract, when he could inform himself and has not done so.” . . . Parties are equally free to enter into agreements both wise and unwise. Courts have the power to declare contracts unenforceable only in rare circumstances — none of which exist in the present case.

One judge dissented on the liquidated damages holding, contending that the defendants had made a sufficient showing of facts and argument to show a finder of fact (the jury) that the stipulated damage clause was a penalty because the estimate of damages would not have been difficult to calculate because of indefiniteness or uncertainty.    The dissenter cited to pattern jury instructions:

First, that the damages which the plaintiff and the defendant might reasonably anticipate from a breach of their (name contract) were, at the time they entered into (name contract), difficult to ascertain because of their indefiniteness or uncertainty.

Second, that the amount of damages stipulated by the plaintiff and the defendant was either a reasonable estimate of the damages which probably would be caused by a breach or is reasonably proportionate to the damages which have actually been caused by the breach.

N.C.P.I. – Civ. 503.94 (footnote omitted). (Emphasis added.)

The judge wrote:  “The second question involves a ‘reasonableness’ determination. In my view, when credible conflicts in documentary evidence in the written contract is [sic] adduced at the summary judgment stage, it is sufficient to raise a material question of fact, and then summary judgment is inappropriate. I would reverse and remand this matter to the trial court for a jury determination on both the availability of liquidated damages and the amount, if any.”  (Emphasis added.)

Note that this dissenter is making the argument that the case should have been decided by a jury, and not by the court, after a reasonableness determination about the damages that the majority had concluded had already been made and agreed upon by the parties to the contract, because the parties are better able to determine for themselves what is fair and – well, reasonable.  And, note that this determination is one based on what the parties might “reasonably anticipate” and “reasonabl[y] estimate” as damages which are “reasonably proportionate.”  And, note that all of this thinking is done without a clear statement or definition of what “reasonable” or “reasonably” mean.  Just some hints that all involved – the parties, the court and the jury – should examine the facts, think logically, and make a judgment call.

And, the Banyan dissenter proves the old adage that “reasonable minds may differ.”  Sometimes, Court of Appeals judges also declare that the parties can’t decide for themselves what is reasonable in their contract provisions, and that those decisions are made by the judges, as a matter of law.  We will talk more about that in part 2.