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Paralegal 101: A Real Estate Contract Breach Is Very Complicated And Serious Business

Paralegal 101: A Real Estate Contract Breach Is Very Complicated And Serious Business

Your real estate attorney will do so much better explaining this to you than I. I do not give legal advice but will engage in a generic conversation while pointing people in the direction of a more appropriate professional. Agents and brokers sometimes get asked very interesting questions that prompt us to respond and/or do things like tell folk to speak to their attorney. I am going to answer a New York quiz question for a friend using three Lex-Nex quotes on my blog because the legal research concerning my attorney gal pal pop quiz was very interesting:

Lexus-Nexus Quote #1: "Damages resulting from a breach of a real estate contract are not readily ascertainable at the creation of the contract, due to the regular market fluctuations of the value of real property in the real estate market. See e.g., Price v Price, 113 AD2d 299, 307, 496 N.Y.S.2d 455 (2nd Dept. 1985); In re Davenport's Will, 104 NYS2d 433, 436 (Surr. Kings 1951). In Downtown Harvard Lunch Club, the Court held that in a contract for leasing a lunch club, the damages that would be suffered by the plaintiff if the defendant was to breach was uncertain at the creation of the contract, due to the variable of when the defendant would breach and the availability of other similar lunch club facilities at the time of the breach. See, Downtown Harvard Lunch Club, 201 Misc at 1091. Therefore, the "parties reasonably and properly could decide to estimate and fix in advance a stated sum which would be regarded as proper compensation for a breach." Id. "

Lexus-Nexus Quote #2: "A liquidated damages clause must bear a "reasonable relation to [the] amount of probable actual harm" that could have been foreseen to the Plaintiff if the Defendant breached at the time of the drafting of the contract. Truck Page 22 2010 NY Slip Op 31438U, *3; 2010 N.Y. Misc. LEXIS 2377, **5 RAC, 41 NY2d at 425. The amount of money agreed upon by both parties "must constitute an amount sufficient to satisfy for actual loss or injury flowing from such breach. A liquidated damages clause will be upheld when the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." 36 NY Jur 2d § 168, at 239-40."

Lexus-Nexus Quote #3: "Subsequent to the making of the contract in question, the parties entered into a letter agreement whereby the defendant agreed to pay plaintiff additional sums representing carrying charges for the property at issue in the event the closing on the property did not occur by a date [*9] certain, time being of the essence. Part of that payment was supposed to be $ 8,294.11 to be returned along with the signed letter agreement. Defendant, in fact, returned the countersigned letter agreement dated January 29, 2009 agreeing to pay the carrying charges and further agreeing to pay the $ 8,294.11. Defendant issued a check to plaintiffs in that sum but there was no signature on the check. Defendant now contends in its post-trial [**14] memorandum that the letter agreement is not valid due to the fact that the failure of the defendant to return the signed check despite its signature on the letter agreement represented a lack of "meeting of the minds", vitiating the letter agreement between the parties. This assertion is contrary to the defendant's own Court testimony in which the defendant's witness admitted to an oversight in not signing the check. The parties both countersigned the letter agreement and the defendant issued a check in the amount of $ 8,294.11. For the defendant to now claim that it purposely failed to sign the check in order to precipitate an incident where there was no "meeting of the minds" is disingenuous at best. The parties obviously understood that the plaintiffs would be incurring additional ascertainable costs associated with the delayed closing on the property and agreed separately and outside of the underlying contract of sale to provide compensation to plaintiffs for those very costs. See, Panasia Estates, Inc. v Hudson Ins Co., 10 NY3d 200, 886 N.E.2d 135, 856 N.Y.S.2d 513 (2008); Bi-Economy Market, Inc. v Harleysville Ins. Co. of New York, 10 NY3d 187, 886 N.E.2d 127, 856 N.Y.S.2d 505 (2008).. Therefore, in addition to the liquidated damages previously [**15] paid, plaintiffs are entitled to the consequential damages agreed upon by the parties subsequent to the making of the underlying contract to the sum of $ 26,029.48."

The fun thing about having attorney girlfriends is the fact that they keep me on my paralegal tippy toes (LOL). My recreatioal reading list is very diverse and a wee bit crazy... especially when the girls send me on a virtual joy ride. I have two questions left... hmm... I bet you're wondering what on earth are these girls going to inspire me to post next (LOL). In case you are wondering there is a lunch bet at stake here. Did I mention they are training me to become a broker? My deadline is Christmas. ;-)





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Comment balloon 5 commentsC Tann-Starr • August 01 2010 02:46PM


Good luck in your quest/bet to become a broker. Also, great breakdown on the basics of real estate law.

Darrell Walters, Newnan Mortgage Lender

Posted by Home Loan Search.Online (Home Loan Search Online) almost 9 years ago

Thank you, Darrell. The girls are givig me a run for my money (LOL). It's fun training with friends. :-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) almost 9 years ago

Hi C -- As a small real estate broker/owner, I am keenly sensitive to all matters legal, and I always make sure clients are well aware of their right and need during certain circumstances for legal representation.  I just strongly encouraged a buyer client of mine recently to seek legal representation for a very complex issue and it couldn't have worked out better for them.

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) almost 9 years ago

C....I have always recommended that clients seek legal advice from an expert of their choosing.  Many issues are too complicated to do more than point the person in the right direction to obtain the legal answers.

Posted by Carra & Shae Riley, Helping people Transition at all ages! (Brokers Guild Cherry Creek Ltd) almost 9 years ago

Chris, it's a beautiful thing when life works out for our clients. :-)

Carra, nothing like having a great attorney, eh? :-)

Posted by C Tann-Starr (Tann Starr & Associates, Inc.) almost 9 years ago