Real Estate & Land Use Newsletter: Entitlement Contingency in Purchase Contract Ruled to Be Unenforceable Option

more+
less-

In May 2008 the California Court of Appeal issued a decision with potentially draconian consequences in Steiner v. Thexton, 2008 WL 2191300 (Cal. App. 3d Dist.). The Court of Appeal held that a real estate purchase contract containing a contingency allowing the buyer the absolute and sole discretion to terminate the contract if the buyer were unable to obtain entitlements for the development of the subject property was ?really an attempt to create an option agreement,? which failed for lack of consideration. When Thexton, the seller, informed Steiner, the buyer, that he no longer wanted to sell the property, Steiner had already made a $1,000 deposit into escrow and completed 75%- 90% of the work needed for his desired entitlements. Nonetheless, the Court of Appeal ruled that Thexton had the right to terminate the contract unilaterally because, as ?an option not supported by any consideration,? it was unenforceable against the Seller. As to the $1,000 deposit in escrow, the Court of Appeal found that it did not constitute consideration because it was applicable against the purchase price if Steiner elected to proceed with the purchase. Since the attempt to create an option failed due to lack of consideration, the ?contract? was, according to the Court of Appeal, ?nothing more than a continuing offer to sell that could be revoked by Thexton at any time.?

See full newsletter for more information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Manatt, Phelps & Phillips, LLP | Attorney Advertising

Written by:

more+
less-

Manatt, Phelps & Phillips, LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×