Monday, August 27, 2007

No Enforcable Option for Real Estate Purchase Due to Absence of Essential Terms

Judgment for Specific Performance Reversed Because Dispute About Time and Manner of Payment Prevented the Court From Applying the Rule of Reasonable Time and Manner

Patel v. Libermensch (Aug. 21, 2007, Fourth Dist., Div. One, D048582)
27 page opinion

UPDATE: REVIEW GRANTED (On Nov. 14 the Supreme Court granted review) (S156797)

Liebermensch appealed from a judgment ordering specific performance of a real estate option contract. Liebermensch and Patel had entered into a lease and an option contract for a condominium. Liebermensch drafted both contracts. When Patel notified Liebermensch that he was exercising the option to purchase the property, Liebermensch drafted a real estate purchase agreement with terms of the manner and time of payment. Patel sent back a draft purchase agreement that altered those terms. Liebermensch did not accept Patel's draft. Patel signed Liebermensch's draft but negotiations stopped.

To be enforceable an option contract must state the term of the option and contain the terms essential for the ultimate sales contract - identification of the parties, identification of the property, the purchase price, and the time and manner of payment.

Some California cases have held that contracts for the sale of real estate were not unenforceable for a failure to specify the time of payment because the law implies a reasonable time. In this action, however, the Court of Appeal found that the evidence showed the time and manner of payment always remained in dispute and that those disputed terms were deal-breakers for both parties.
Justice Huffman wrote the opinion. Presiding Justice McConnell concurred.

Judge McIntyre dissented.

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