Daily Development for Friday, August 30, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

VENDOR/PURCHASER; CONDITIONS; PAYMENT: Where contract provides that, upon receipt of the purchase price, sellers shall "make, execute and deliver" at deed to the subject property, sellers have no obligation to deposit deed into escrow until they have received a check, and buyer cannot withhold wire transfer of purchase monies until buyers have delivered a signed deed into escrow.

Roberts v. Clark, 2002 WL 220838 (Tex. Ap. 2002) (appeal pending)

The contract was for delivery of certain acreage for a purchase price of $1.6 million. Prior to the scheduled closing on May 1, the title company informed the sellers that the buyer would not wire transfer monies until May 1, and that, due to delays caused by escrow and banking procedures, it would not have a check for them until May 2. They therefore elected not to come to the title company on May 1, but did arrive on May 2.

Upon being told that the sellers had not executed a deed and deposited it with the title company on May 1, the buyer refused to authorize the wire transfer, and consequently there were no funds for sellers when they appeared on May 2, whereupon sellers declared buyer in breach and sued for damages.

Held: Under the precise wording of the contract, which provided that the sellers would "make, execute and deliver" the deed upon payment by the buyer, the prior delivery of the sale price was a condition precedent to the sellers' performance and a duty of the buyer. Although sellers may have been uncooperative in refusing to give a deed to the title company until they had their check, they were within their rights under the contract.

Buyer is in breach, and sellers were excused from performance.

Comment 1: Clearly this case could and should have been resolved in advance by proper wording the sales agreement making the closing process more clear. The tender of the purchase price was a precondition to delivery of the deed into escrow only because the contract made it so.

The contract appears to contemplate a "table closing" while the buyer apparently intended to have an escrow closing.

The case is a call to all those in the business of drafting standard agreements to pull those forms out to be sure that the provisions detailing how the closing will work do not set forth conditions that are inconsistent with the business practices involved.

Comment 2: Is there an argument that "trade practice" ought to have resolved this case in favor of buyers. It appears that the buyer was "in the trade" - it was a company named Agriland with multiple offices. But were sellers? Should trade practices be binding upon individuals who only enter into contracts for the sale of land three or four times in their lives?

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