DIRT  Development for Thursday, January 5, 2009
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

VENDOR AND PURCHASER.   Vendor’s removal of lockers from recreational facility during pre closing period permits termination under a contract clause that stated purchaser had the option to rescind contract if “any buildings or other improvements are damaged or destroyed” before closing even if Vendor restores the lockers prior to closing and even though, because of restoration, the removal was not a “material breach.”

Marion Family YMCA v. Hensel, 897 N.E.2d 184, (Ohio App. 3 Dist. 2008). 

Buyer Hensel entered into contract with YMCA for purchase of an old YMCA building.  After contract was signed, buyer toured building and noticed a wall of lockers had been removed.  Buyer considered this to be a breach of the contract and told YMCA the contract was terminated. 

YMCA restored lockers before the scheduled closing and informed buyer of their restoration.  YMCA proceeded with the sale by retaining an attorney to complete the closing.  Attorney wrote buyer twice, requesting that closing be scheduled immediately or the property would be listed for sale again.  After no further action was taken to resolve the matter, YMCA sold the building to a third party and filed a complaint to recover the price difference from buyer.  At trial, a jury returned a verdict in favor of YMCA for $125,000. 

Buyer appealed on two grounds.  First, buyer claimed that YMCA materially breached the contract by removing the lockers.  Generally, a material breach of contract will entitle a party to stop performance; a “material breach of contract” is a failure to do something that is so fundamental to a contract that the failure to perform defeats the essential purpose of the contract or makes it impossible for the other party to perform.  Until the time of closing, YMCA still had time to perform the contract and remedy any nonmaterial breach, which it did.  Therefore, the jury did not err in finding that the removal of the lockers was not a material breach of the contract. 

Buyer also claimed that the contract permitted him to terminate the agreement because the lockers were improvements that were damaged or destroyed prior to the delivery of the deed.  The contract stated “if any buildings or improvements are damaged or destroyed” before closing, the buyer has the option to rescind the contract.  Even if the lockers were not fixtures, they were improvements to the building and were covered by the plain language of the contract.  Therefore, their removal altered the property with the same effect as if they were destroyed.  The contract did not require the buyer to give the seller time to cure.  Thus, buyer had the right to terminate the contract as a matter of law.  His termination was not a breach of the contract, and the trial court erred in holding otherwise.
Editor’s Comment: Oh, pooh. Certainly the terms “damaged or destroyed” must have contemplated injury to the building that raises a legitimate concern that the building would be in the same condition at closing that it was at contract signing.  Otherwise, vandals throwing a rock through a window or the breaking of a door hinge while sellers are removing their furniture could satisfy the condition.  Here, as the seller apparently responded promptly and restored the premises to its original condition, the buyer’s backing out on the basis of the lockers was nothing more than a pretext that the court should not honor. 

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