Lawrence contacted Donald, owner of many large apartment buildings in the vicinity, about buying several of Lawrence’s apartment properties. During their meeting, Donald prepared a handwritten “Contract for Sale of Real Property,” which listed the five buildings Lawrence wanted to sell to Donald.
The memorandum identified the five buildings. Two of the sales closed without problems. However, Lawrence later refused to deliver titles to the remaining three apartment properties. He said the handwritten memorandum was too indefinite.
Purchase Bob Bruss reports online.
The agreement said the sales prices for the three buildings would be “Approx. 10.468 X gross income, estimated income $1.6 million; cash to loan; contract to be completed within 30 days.” A day or two later, Donald gave Lawrence’s accountant three checks of $500,000 each as good-faith deposits on each of the three properties.
However, when the escrow documents specified a $16.75 million total purchase price, Donald refused to sign. His reason was the memorandum said the price was to be 10.468 times the gross income, which turned out to be $1.38 million, instead of the $1.6 million Lawrence originally estimated.
When the sales did not close on schedule, Donald patiently insisted on closing at a sales price of 10.468 times the actual apartment rents. But Lawrence refused to deliver the deeds.
Several months later, Donald sued Lawrence for specific performance of the sales contract to purchase at a $14.4 million total price. But Lawrence replied there was no binding sales contract because the Statute of Frauds was not satisfied as a result of the handwritten memorandum being too vague and indefinite.
Donald responded that the contract details could be supplied by parol or extrinsic evidence to explain the exact terms the buyer and seller agreed upon. He also sued Lawrence for fraud damages.
If you were the judge would you order Lawrence to specifically perform the handwritten sales contract and deliver title for the three apartment buildings to Donald at 10.468 times their actual gross income?
The judge said yes!
A written real estate sales agreement that shows the intent of the buyer and seller is sufficient to satisfy the Statute of Frauds, the judge began. While certainly not recommended, this very basic handwritten memorandum contains the essentials of these property sales, he continued.
Parol or oral evidence is allowable to show the intent of the parties when they entered into their written sales agreement, the judge explained. “Even though an essential term in a memorandum is ambiguous and requires parol evidence to clarify any ambiguities, the writings are not insufficient to satisfy the Statute of Frauds,” he emphasized.
The modern trend of the law favors carrying out the parties’ intent through the enforcement of contracts and disfavoring holding contracts unenforceable because of uncertainty, the judge commented.
This simple handwritten real estate sales contract was sufficient to establish the sales price was to be 10.468 times the actual gross rental income of the three apartment buildings, the judge ruled.
Although there was no evidence of fraud damages, Lawrence is ordered to specifically perform the sales contract and deliver title to the three apartment buildings in return for Donald’s payment of 10.468 times their gross rental income, the judge concluded.
Based on the 2004 California Court of Appeals decision in Sterling v. Taylor, 6 Cal.Rptr.3d 836.
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