§6.5 - Relationship to other Contract Provisions

• Jurisdiction: Washington

§6.5 RELATIONSHIP TO OTHER CONTRACT PROVISIONS

This section discusses the relationship of specific performance to conditions precedent and liquidated damages clauses in contracts for real property.

(1) Effect of conditions precedent

Real estate purchase and sale agreements that are subject to conditions precedent may be specifically enforced if the conditions precedent are satisfied or waived. For example, in Paradiso v. Drake, 135 Wn.App. 329, 143 P.2d 859 (2006), review denied, 160 Wn.2d 1024 (2007), even though a buyer had no right to specific performance under the contract if the seller could not deliver insurable title, the buyer was nonetheless entitled to enforce the agreement when his actions indicated an intent to waive the encumbrance of an easement for a drainfield. However, when a condition to closing is not properly waived, the buyer may be left with contractual remedies that do not include specific performance. In Evans v. Rauth, 138 Wn.App. 834, 158 P.3d 1261 (2007), the purchase agreement included an inspection contingency and provided that if the contingency was not satisfied or waived, the contract would terminate and the earnest money would be refunded. When the parties discovered that the septic system needed to be replaced, the buyer attempted to negotiate an extension but failed to send a notice waiving the contingency. The court concluded that the seller was not in breach and that a condition to closing had failed. Because there was no waiver of the inspection contingency, specific performance was not available and the buyer's only remedy was termination and refund of earnest money.

When a condition precedent to the exercise of an option is not met, such as compliance with all of the terms and conditions of a lease, the court will not grant specific performance. Corbray v. Stevenson, 98 Wn.2d 410, 656 P.2d 473 (1982). In Investment Syndicates, Inc. v. Clark, 3 Wn.App. 1001, 478 P.2d 752 (1970), the sellers defended against the purchaser's specific performance action on the grounds that the contract was illusory and unenforceable by reason of the fact that the purchasers' obligation was "subject to formation of group for this purchase." Id at 1002. Noting that agreements conditioned upon the securing of financing are subject to specific performance, and that the subject agreement was definite as to time because the satisfaction of the condition would occur prior to the closing date, the court had no difficulty in...