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Ready, Willing and Able Buyer? The Courts Decide./Users/adamp/Desktop/Stuff for FAR/Magazine Assets/JULY08/images/KnowLaw

A court determines that a gratuitous promise of financing from a friend is not sufficient to support a buyer’s specific performance claim.

Friends often loan friends money. But is a friend’s promise to finance a buyer’s real estate purchase sufficient to support the buyer’s assertion that he or she is ready, willing and financially able to buy the property on the agreed-upon closing date and thus is entitled to specific performance?

That’s a question the 5th District Court of Appeal (DCA) was asked to decide in the case Lusignan v. Lusignan (5th DCA, 2008).
Here’s what happened.

Shortly after the seller’s house was damaged by hurricanes in 2004, she entered into a contract to sell it to her stepdaughter for $100,000. The contract included a Nov. 1, 2004, closing date and was contingent on the buyer obtaining financing.
The buyer claimed that a wealthy friend’s husband had agreed to loan her $100,000.

Seller Leaves State
Several days before the closing, the seller left Florida. As a result, the closing didn’t take place on Nov. 1 (the buyer alleged that she was unable to contact the seller and thus unable to close). The seller eventually returned to Florida and made substantial repairs to the home. Soon afterward, the buyer contacted the seller to schedule a closing. But the seller said she wasn’t required to close (since the contract’s Nov. 1 closing date had passed) and claimed that she hadn’t left the state to avoid the closing and could’ve easily been contacted by telephone. The seller filed a lawsuit, seeking a determination by the court that the buyer had no claim to the property. The buyer filed a counterclaim, asking that the court require the seller to convey the property to the buyer pursuant to their contract, as well as breach of contract.

Ruling Favoring Buyer Reversed
Following a nonjury trial, the court of appeal ruled in favor of the buyer and ordered specific performance of the contract. It concluded that the buyer was ready, willing and able to perform the contract but was unable to contact the seller once she left the state—making the Nov. 1 closing an “impossibility.” The seller appealed the decision to the 5th DCA.

On appeal, the 5th DCA reversed the trial court’s decision and explained that pursuant to Florida law a buyer seeking specific performance of a contract must allege and prove that the buyer either (1) paid the balance due under the contract; (2) tendered the balance or had been ready, willing and able to pay such balance; or (3) was excused from performance. In this case, the 5th DCA determined that the trial court “misunderstood” the meaning of “ready, willing and able,” and agreed with a series of decisions by the 4th DCA, wherein that court of appeal had outlined a three-pronged test for determining whether a buyer is financially ready and able to buy, specifically: “where the purchaser relies primarily, not upon his own personal assets, but upon the proceeds of a contemplated loan or loans to be made to him by a third party, he is financially able to buy only if he has a definite and binding commitment from such third-party loaner. Even though the third party is financially able, his promise is of no avail unless made for an adequate consideration.”

The 5th DCA indicated that the trial court had relied on the testimonies of the buyer and of the friend’s husband, who, although acknowledging that he wasn’t a mortgage lender, said he was “simply going to write [the buyer] a check.”

This evidence, according to the 5th DCA, was insufficient to establish that the buyer was financially ready, willing and able on the closing date and thus entitled to specific performance. The 5th DCA noted that although the buyer’s friend’s husband agreed (as a friend) to provide the loan, and had claimed financial ability to do so and had even provided written confirmation of the financial ability to do so, no evidence had been presented by the buyer of his financial standing, of her having a binding commitment from him or that the promise was anything more than gratuitous. Therefore, the 5th DCA determined that the trial court had wrongly ordered specific performance of the contract.

Finally, the court rejected the buyer’s claim that she was alternatively entitled to damages (the difference between the contract price and the current fair market value of the property) under a breach of contract claim. The 5th DCA concluded that since the buyer couldn’t be considered ready, willing and able financially under the specific performance claim that she couldn’t be considered ready, willing and able under the breach of contract claim either.