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Contracts, Waivers & Remedies

If a party to the contract fails to comply with the term of the contract (Breaching Party) the other party (Innocent Party) should think twice about waiving the condition because such action may result in abandoning the Innocent Party's legal rights to enforce the contract remedies. Even when the contract incorporates a non-waiver clause conduct of the Innocent Party may waive that provision as well. Generally, I caution my clients that once a breach occurs the Innocent Party should elect to terminate and sue for damages or make a clear affirmation to continue performance. Notice of this election must be conveyed to the Breaching Party. An Innocent Party that does not make an election and give notice to the Breaching Party after the Innocent Party is aware of the breach runs the risk of being bound to the contract. 

In a real estate transaction failure to make the required deposit on time would constitute a material breach. The Seller would have the option of suing the Buyer for the amount of the deposit, which might include an attorney’s fee if successful, still the suit would have the effect of keeping the property off the market until the case is decided, and in Florida that can be a very long time. Meanwhile the cost to the Seller of carrying the property expenses during the period of litigation are not damages that are eligible for recovery in the suit. Assuming that the Seller (Innocent Party) unreasonably delayed in sending the Buyer (Breaching Party) notice of termination of the contract, the Breaching Party may still be entitled to enforce the sale despite the breach.  Perhaps the Buyer has determined that he has made a very good deal and that he can flip the property for much more at a later date, which for practical purposes might be years later pending a final disposition of the suit, or perhaps, and more likely, the Buyer (Breaching Party) may just try to force the Seller to reduce the sale price in order to settle the litigation. 

Adrian Developers Corp. v. De La Fuente,905 So.2d 155 (Fla. App., 2004) involved the purchase of real estate wherein the Buyer failed to deposit the down payment as required by the contract. The Buyer ultimately did deposit the money seven days late. The Seller did nothing prior to the late deposit to terminate the contract, but after the late deposit the Seller attempted to negotiate additional terms as a condition of the Seller’s performance.  The court in this case agreed that the contract was not properly terminated by the Seller.