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Deposit not Partial Perfromance

by Thomas Tripodianos

This is a two for one this month.  Both questions lend themselves to concise answers but don’t let their length diminish the importance of the concepts they present.

Q1.  Buyer and the Seller entered into negotiations for the sale of real property owned by the Seller.  Although one of the Buyer's principals signed a proposed contract at the office of the Seller's son who was acting as the Seller's attorney, and tendered the down payment, the Seller never executed the contract. May the Buyer compel specific performance of the proposed contract?

NO.  The Seller never signed the proposed contract. Whether the Seller's son had the authority to bind the Seller is not relevant to the instant dispute, as the Buyer concedes that the Seller's son did not sign the proposed contract in the first instance. Furthermore, the Buyer's tender of a down payment upon signing the proposed contract, standing alone, did not constitute part performance which would take an oral agreement for the sale outside the statute of frauds and the requirement that agreements for the sale of real property be reduced to a signed writing.

Q2.  Where the Buyer has defaulted under the parties' real estate sale contract may the Seller retain the down payment which constitutes approximately 14% of the contract price?

YES. Pursuant to settled case law and the express terms of the contract, the Seller was entitled to retain the monies deposited with it by the Buyer pursuant to the contract The mere fact that the amount retained by the Seller was approximately 14% of the contract price was insufficient to support  the conclusion that the parties did not enter into an arm's length agreement or provided for an unenforceable penalty or was the product of overreaching

If you would like more information regarding this topic please contact Thomas S. Tripodianos at TTripodianos@wbgllp.com, or call him at 845-294-5500 x 317. 

Please understand that this column provides general information only, and should not be construed as legal advice to anyone under any circumstances.  The author reserves the right to modify any questions submitted so as to broaden their appeal.  While we encourage you to contact us, you should not disclose to us any information that you consider confidential unless and until we have formally established an attorney-client relationship, and agreed to represent you in your particular matter.  The opinions expressed in this column are of the individual author, and not necessarily those of the Builder’s Association of the Hudson Valley.