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BLOG / 02.03.25 /Avi Strauss

Court Victory Highlights the Importance of Understanding a Contract’s Terms and the Conditions for Obtaining Equitable Relief

Our client, the seller of a five-story mixed use building, entered into a contract with a Time of the Essence (TOE) closing date. The purchaser was not ready to close by the TOE closing date, but by amendments to the contract, the parties twice extended the purchaser’s time to close.

As the final TOE closing date approached, the purchaser again refused to close, alleging for the first time that the seller had misrepresented in the contract whether any lease renewal or extension options had been granted to the building tenants. The purchaser refused to show up at the scheduled closing. The seller declared the purchaser in default and cancelled the contract.

The purchaser (through its purported contract assignee) then filed  a lawsuit against the seller seeking  specific performance, a declaratory judgment and injunctive relief, while also filing a notice of pendency to cloud the property’s title.  The purchaser alleged that the seller’s purported misrepresentation constituted a breach of contract. Our firm promptly filed a motion to dismiss on behalf of the seller.

Court’s Decision

 In its October 16, 2024 Decision & Order, the court granted the seller’s motion to dismiss the purchaser’s claim for equitable relief in its entirety and directed the county clerk to cancel the notice of pendency. The court’s decision offers valuable insights into the enforcement of contractual terms.

2. Purchaser’s Readiness to Close: The court dismissed the purchaser’s claim for specific performance, finding that the purchaser was not “ready, willing and able” to close on the TOE date. The court emphasized that the purchaser’s assertion of readiness – conditional on the seller correcting the alleged misrepresentation – was insufficient to satisfy the standard, since it amounted to a willingness to actually appear, i.e., to show the ability and readiness to close, only under changed circumstances.
3. Contractual Bar to Specific Performance: Furthermore, the court determined that the purchaser was contractually barred from seeking specific performance based on its particular claims. The contract of sale provided that the purchaser could only pursue specific performance if the seller had “willfully” defaulted. Here, the court found that even if the  misrepresentation had occurred, it did not constitute a “willful” default. Thus by its terms, the contract only allowed the purchaser to sue for recovery of its down payment.

Key Takeaways

The decision serves as  a reminder of the importance of understanding all of the wording in a contract’s terms and conditions, even if it seems to be simply “legalese.” In this case, our client’s rights were upheld because the purchaser’s claims could not override the clear terms of the agreement requiring a “willful” default in order to enforce an equitable remedy.  The court’s ruling reinforces the principle that contracts must be enforced as written.

The decision also highlights the importance of a purchaser being truly “ready, willing and able” to perform if they claim a default by the seller under a contract. The purchaser’s inability to demonstrate such readiness at the TOE deadline prevented it from demanding specific performance by the seller even if its attempt to introduce new issues at the eleventh hour were ultimately to be upheld.