Every purchase or sale of a home involves a contract. In order to avoid a lawsuit, it is important to know your right to have a lawyer look over a contract, hire a realtor that is knowledgeable and honest and to educate yourself on some of the ins and outs of a contract.
Let' start by defining a breach of contract. When signing a contract, you are expected to carry out all the promises and requirements that you agreed to. Therefore, any failure to carry out the material part of a contract in the designated time of the contract is considered a breach of contract. If one party breaches a contract, steps can be taken to remedy the breach.
How The Law Protects You
There will be instances where you will unintentionally be unable to act according to the terms of a contract. In this instance, the law protects you with Substantial Performance. With Substantial Performance, you are acting "sufficiently" within the contract requirements. Examples include a closing date that might be pushed back a day or two or a builder not completing a minor act, such as missing painting one baseboard. In these cases, damage is not intentional or substantial enough to require a lawsuit. If, however, the builder, for example, does not follow what is written in the contract, making huge changes to what is agreed upon, they will not be protected under Substantial Performance.
If you do have to deal with a breach of contract, it is important that you are first considered entitled to a remedy for that breach. To be entitled, you must be "ready, willing and able to perform" what is asked in the contract. Therefore, a seller must present the deed and a buyer must present the purchase money. If you qualify, remedies include Damages, Specific Performance, Rescission and Injunction.
Damages is the money owned to the person suffering from the loss caused from the breach of contract. Therefore, the seller that breaches, owes the buyer money paid in anticipation of closing. The buyer that breaches would owe the seller their earnest money and may be sued for other costs. Actual, or Compensatory, Damages are those actually suffered. Punitive, or Exemplary, Damages are those given as punishment to prevent further similar acts.
This remedy is not as easy to enforce and generally only used if extreme hardship would result without the remedy. Specific Performance is ordering someone to perform as agreed upon in the contract. Therefore, for example, the court may order the buyer to pay what was agreed upon or the seller to pass the deed.
Recision is essentially restoring the contract to its original state before it was signed. It is cancelling or voiding the contract. Both the buyer and seller may rescind if there was a mistake by both parties. For example, if both parties were mistaken on how the property was zoned, they could rescind. If one party was aware of the truth, however, a mistake was not made and recision is not a remedy. Recision is also available with innocent misrepresentation. This is an unintentional error in a material fact of the property. Damages by the person who misrepresented would not be granted to the person damaged, because the error was unintentional. However, recision is a remedy to the person damaged, because any error they may make is from them relying on what they were told by the other party. Undue influence is the controlling of a person to the extent that they are influenced and dependent on that person and duress is coercing someone with a threat or force to do something. Both of these are protected by recision. Finally, Fraud, the most serious of offenses, is the intention to deceive. The person who is harmed by fraud, is allowed to rescind and cancel the contract.
This written order commands someone to do, or not do, something. It is a legal remedy to force compliance with what is stated in the contract.
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