Crabby's, Inc. v. Hamilton

Missouri Court of Appeals · Contracts

ContractsReal estate sale contractsFinancing contingenciesWaiverDamagesfinancing contingencywaiverreal estate contract

Facts

Seller agreed to sell its restaurant property to Buyers for $290,000 under a contract containing a financing contingency requiring Buyers to furnish a written loan commitment within 30 days of the effective date. Buyers never furnished such a commitment, but after that deadline they executed amendments extending the closing date, took possession for cleaning, transferred utilities into their name, pursued restaurant licenses, and proceeded toward closing with financing approved by Bank of Joplin on terms they found acceptable. Two days before the scheduled August 1, 2003 closing, Buyers notified Seller they would not close, citing allegedly removed fixtures and tax liens, not financing. Seller later resold the property on July 15, 2004 for $235,000 and sued for breach.

Issue

Did the contract's financing contingency excuse Buyers from performance, or did Buyers waive that contingency by their conduct after the deadline for furnishing a written loan commitment passed? If Buyers breached, was Seller's later resale price eleven and one-half months after breach substantial evidence of the property's fair market value on the breach date?

Rule

A financing contingency in a real estate contract is a condition for the buyer's benefit, and upon nonoccurrence the buyer is ordinarily excused from performance; however, the buyer may waive that condition by express agreement or by conduct amounting to a clear, unequivocal, and decisive intentional relinquishment of a known right. For a seller's damages when a buyer breaches a contract to purchase land with a structure, the measure is the difference between the contract price and the fair market value on the date of breach, and if the seller resells within a reasonable time after the breach, the resale price is some evidence of that market value.

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Nora Vega agreed to buy a cafe building in Springfield, Missouri, from Oak Lantern Properties for $420,000. The contract said it would automatically terminate unless Nora provided a written loan commitment within 25 days. She missed that deadline, but two weeks later signed an amendment extending the closing date while stating all other terms remained unchanged, obtained early access to repaint the dining room, and transferred the electric account into her name. Three days before closing, she refused to close because she had found a different site in Tulsa.

If Oak Lantern sues for breach, what is the strongest argument that Nora cannot rely on the financing contingency to avoid liability?

Explanation. A financing contingency is a condition for the buyer’s benefit, and the buyer may waive it by conduct. Waiver implied by conduct requires a clear, unequivocal, and decisive act so consistent with intent to waive that no other reasonable explanation is possible. Signing a post-deadline extension, taking possession rights, and transferring utilities all support waiver. (Derived from Crabby's, Inc. v. Hamilton (n.d.).)