February 7th, 2017 •
Comments Off on Business Transaction Newsletter – September 2016
WHAT CONSTITUTES NOTICE TO TERMINATE A CONTRACT
In the case of Wright vs. Dixon, the Tennessee Court of Appeals opined on the appropriate notice necessary to terminate a contract with a financing contingency provision set forth therein. In the Wright case, the Buyer/Plaintiff entered into an agreement to purchase real property. The contract was contingent upon the Buyer obtaining a loan for 100% of the purchase price. In the event the Buyer acted in good faith and in accordance with the terms of the contract and was unable to obtain financing, the Buyer had the right to terminate the contract by providing written notice and a copy of the lender’s loan denial letter. The contract also had a specific provision on how notices were to be sent. The contract further provided that a notice would be deemed to have been given as of the date and time it is actually received.
The Buyer was not able to obtain financing, so failed to close. The proof at trial was that the Buyer’s real estate agent claimed to have sent a fax to the Seller’s office withdrawing from the contract. However, the Seller testified that she never received the fax. The Buyer’s agent could not produce a confirmation report from the sending fax machine. Her explanation was that because many real estate agents used that fax machine, they were not always able to obtain a printout showing the transmission of the fax.
The Trial Court found the Seller’s testimony to be creditable that she had not received the fax, and therefore the Trial Court ruled that the contract had not been properly terminated.
The Court of Appeals commented that the Trial Court’s reliance upon the creditability of the Seller was important. The Court of Appeals also indicated that had the Buyer’s real estate agent been able to produce a confirmation report printed by the sending fax machine, the Court of Appeals would have at least had a basis for questioning the Trial Court’s acceptance of the Seller’s testimony. The Court of Appeals wrote that in a transaction involving a million dollar piece of property, it is inconceivable that if the fax had truly gone through, the Buyer’s agent would not have provided the machine printed confirmation of the transmission.
MY RECOMMENDATION: Be sure to follow all terms and conditions of contracts to the full degree required. When terminating a contract because of the failure of some contingency to occur, be very specific and very intentional about how notices are sent. Always follow up with confirmation and maintain evidence of the sending of the notice.
Yours very truly,
RAINEY, KIZER, REVIERE & BELL, P.L.C.
William C. Bell, Jr., Attorney at Law