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Default Provisions

Default Provisions. September 2006 Legal Presentation. What is the right to enforce specific performance ?. Specific performance is a legal action in which a court orders one party to a contract to perform what the party has promised to perform. This is an equitable remedy.

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Default Provisions

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  1. Default Provisions September 2006 Legal Presentation

  2. What is the right to enforce specific performance? • Specific performance is a legal action in which a court orders one party to a contract to perform what the party has promised to perform. This is an equitable remedy. • Specific performance is an extraordinary remedy – usually courts will only permit a party to sue for money damages. In the case of sales of homes, money damages may be inadequate. Money damages are a remedy at law.

  3. What other remedies are provided for default? • “Seek relief as may be provided by law” • This refers to any and all money damages. • Terminate the contract and receive the earnest money as liquidated damages • Liquidated damages are an amount that the parties have agreed upon as sufficient to make the non-defaulting party whole. • Is the earnest money being offered by a Buyer enough to compensate the Seller if the Buyer decides not to close at the last minute?

  4. Buyer’s Default – Seller’s Remediesunder 1-4 Family Resale Contract • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate the contract and receive the earnest money as liquidated damages, thereby releasing both parties from the contract.

  5. Seller’s Default – Buyer’s Remedies • The remedies available to the Buyer depend on the reason for Seller’s default. • Seller defaults due to factors beyond Sellers control, by failing within the time allowed to: • Make any non-casualty repairs • Deliver the Commitment • Deliver the survey • Seller defaults for all other reasons

  6. Seller’s Default – Buyer’s Remediesunder 1-4 Family Resale Contract • If, due to factors beyond Sellers control, Seller fails within the time allowed to: • Make any non-casualty repairs • Deliver the Commitment • Deliver the survey • Buyer’s remedies: • Extend the time for performance up to 15 days and the Closing Date will be extended as necessary to • Terminate this contract as the sole remedy and receive the earnest money

  7. Seller’s Default – Buyer’s Remediesunder 1-4 Family Resale Contract • If Seller fails to comply with this contract for any other reason, Buyer may: • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate this contract and receive the earnest money, thereby releasing both parties from this contract.

  8. Sifting Through Remedies • If Seller fails to comply with this contract for any other reason, Buyer may: • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate this contract and receive the earnest money, thereby releasing both parties from this contract. • What if Buyer has already paid for inspections, or had house plans drawn up?

  9. Sifting Through Remedies • If Seller fails to comply with this contract for any other reason, Buyer may: • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate this contract and receive the earnest money, thereby releasing both parties from this contract.

  10. Striking through remedies • If Buyer fails to comply with this contract, Seller may: • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate the contract and receive the earnest money as liquidated damages, thereby releasing both parties from the contract. • Ask Seller to consider whether earnest money being put up by Buyer is enough to compensate the Seller for taking the house off the market.

  11. Striking through remedies • If Buyer fails to comply with this contract, Seller may: • (a) enforce specific performance, seek such other relief as may be provided by law, or both, or • (b) terminate the contract and receive the earnest money as liquidated damages, thereby releasing both parties from the contract.

  12. Completion of Repairs – Section 7F • When does Seller have to complete agreed-upon repairs & treatments? • Per 7F, unless otherwise agreed in writing, repairs must be completed prior to the Closing Date • If the Buyer wants repairs to be completed prior to Buyer’s pre-closing walk-through, then the Amendment should specify the time, • i.e., “Seller shall complete all repairs within 10 days after the effective date of this Amendment,” and “Buyer has right to inspect repairs 3 days before closing”

  13. Buyer’s Remedies if Seller Fails to Complete Repairs • If Seller fails to complete any agreed repairs and treatments prior to the Closing Date, Buyer may do so and receive reimbursement from Seller at closing. The Closing Date will be extended up to 15 days, if necessary, to complete repairs and treatments. • Buyer has right to complete repairs and present receipts to Seller at closing, or Buyer can refuse to close until the Seller completes the repairs.

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