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Enforceability of Purchase Agreement

Please see attached court case Wurtzberger vs. Heidelberger,et al. A05-2063 (Minn. Ct. App. 2006).  This case has important implications regarding the enforceability of terms contained in a purchase agreement or escrow agreement for repairs.  In this recent case, the court considered whether Wurtzberger (“Seller”) breached provisions in the purchase agreement and owed Heidelberger (“Buyer”) damages for failure to make certain repairs and remove debris from the property and also whether the Buyer’s actions constituted a waiver of his right to enforce the terms of the contract.  Click here for court case.

 

Under the purchase agreement, Seller was to remove all debris and personal property prior to the possession date and to also repair and seal the asphalt parking lot.  Seller failed to perform and Buyer sued Seller for breach of contract.  Seller’s defense was that Buyer had waived his right to enforce the purchase agreement because he was aware of the debris and the condition of the asphalt parking lot and their transaction closed without an escrow agreement.  It should be noted that Seller refused multiple requests by Buyer to escrow funds to insure Seller’s performance relating to the debris and asphalt.  Seller did agree to a $1,000.00 escrow for painting the buildings as required in the purchase agreement.  However, Seller did not complete the painting and the lowest bid obtained by Buyer to complete the work was $5,500.00.  Even worse, because the debris included old tires and buried debris were found on the property, the county issued a cease-and-desist order to Buyer to clean up the property.

 

The district court found that Seller breached provisions in the purchase agreement and ordered Seller to pay damages.  The court rejected the Seller’s claim that Buyer waived his rights to enforce provisions in the contract. The court noted that Buyer continually made demands of Seller and he kept assuring him that he would perform.  Even though the court decided in favor of the Buyer, it should be noted how the court considered whether the Buyer had waived his rights to enforce a provision in the purchase agreement.  The court defined waiver as a “voluntary relinquishment of a known right” to be determined by intent.  Intent is determined by acts and conduct of the party.  Although this is an unpublished case, it does give us a glimpse of what may lie ahead.  It is possible that the court may decide a buyer is not entitled to enforce a term in the purchase agreement or escrow agreement based on his or her own action or inaction. 

 
 Practice tips: 

1:  Make sure you include all obligations of either party that are to be completed before or after closing in the purchase agreement with a statement that the obligations continue beyond the closing of the transaction.

 

2:  Do not agree to close the transaction without a written escrow agreement and a detailed description of the items that need to be completed.  Include a deadline for the seller whereby the funds can be released to the buyer and used to complete the work upon the seller’s non-performance.

 

3:  Make sure you have a reliable unbiased party provide an estimate for the cost of completion.  Always error on the side of escrowing excess funds.

 

4:  A party’s acts, conduct, and failure to act may constitute a waiver of legal rights. If your transaction closes without the completion of any term in the purchase agreement be diligent about enforcing your rights.   Communicate demands to the seller in writing and with frequency for performance of the terms of the purchase agreement and escrow agreement.

 

5:  If there is a defect or needed repair, make certain that your post closing use of the property does not add to the damage or loss.

 

6:  Be careful with potential environmental issues.  Make sure you do not close or take possession without resolution.  The cost of environmental cleanup can be extreme.

 

 
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