Resolving a real estate contract dispute involves several key factors related to the contract itself, the alleged breach, and the potential remedies under California law
Proving these factors often requires meticulous documentation and legal expertise.
Contractual foundation
For a dispute to be valid, a clear, enforceable contract must exist.
- A valid contract: In California, most real estate contracts must be in writing to be enforceable under the Statute of Frauds. The contract must be legally binding, with clear terms that establish a “meeting of the minds” between the parties.
- Contractual provisions: Key provisions that can become sources of dispute include:
- Contingencies: Conditions that must be met for the contract to close, such as financing, inspection, or appraisal contingencies.
- Deadlines: Dates by which certain actions must be completed, including the closing of escrow.
- Liquidated damages: A clause that specifies a predetermined amount the breaching party will pay. In California residential contracts, this is often the buyer’s deposit and is typically capped at 3% of the purchase price.
Breach of contract
To win a dispute, the plaintiff (the non-breaching party) must prove the defendant breached the contract without legal justification.
- Breach of duty: A breach occurs when one party fails to fulfill their contractual obligations. Common examples include:
- Failure to close: When a party does not complete the transaction by the agreed-upon closing date.
- Missed deadlines: When a party fails to perform an action by a contractual deadline.
- Failure to disclose defects: When a seller conceals known, material defects that could affect the property’s value.
- Plaintiff’s performance: The plaintiff must demonstrate they fulfilled, or were ready to fulfill, their own obligations under the contract.
- Materiality of the breach: The breach must be “material” or “substantial”—a significant failure that undermines the purpose of the agreement. Minor or technical breaches generally do not support a claim for damages.
- Causation: The plaintiff must prove that the defendant’s breach directly caused their damages.
Damages and remedies
The plaintiff must demonstrate they suffered actual, provable damages as a result of the breach. California law offers several remedies:
- Mitigation of damages: The non-breaching party has a legal duty to take reasonable steps to minimize their losses after a breach occurs. Failure to do so can reduce the amount of recoverable damages.
- Monetary damages: These are the most common form of relief and can include:
- Compensatory damages: To compensate for financial losses.
- Consequential damages: Indirect damages, such as lost profits.
- Liquidated damages: Predetermined damages specified in the contract.
- Equitable remedies: When monetary damages are not sufficient, a court may order a non-monetary remedy.
- Specific performance: A court order compelling the breaching party to fulfill their contractual obligations, such as completing the sale of a unique property like real estate.
- Rescission: This remedy cancels the contract and restores both parties to their pre-contract positions. It is often sought in cases of fraud or mutual mistake.
- Attorney’s fees: The “American Rule” generally requires each party to pay their own legal fees. However, a prevailing party may recover fees if specifically authorized by a contract provision.
Time limitations
Statutes of limitations dictate the time frame for filing a lawsuit.
- Written contracts: Four years from the date of the breach.
- Oral contracts: Two years from the date of the breach.
- Fraud or misrepresentation: Three years from the date the fraud or defect was discovered.
External factors
Other issues can factor into a real estate contract dispute:
- Fraud or misrepresentation: Intentionally providing false information or concealing material defects can support a legal claim separate from breach of contract.
- Title disputes: Issues related to the legal ownership of the property can prevent a sale from closing.
- Boundary and easement disputes: Conflicts over property lines, fences, or the right to use another’s property.
Real estate agent negligence: An agent’s failure to disclose material information or breach of fiduciary duty can lead to litigation
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