MISSED DEADLINE ON CONTRACT HAS CONSEQUENCES

Q: I signed a contract about a year ago with a small builder to buy a new home. Since then, housing prices have risen a lot, especially in this neighborhood. My contract called for an additional earnest money deposit a few weeks ago, and I inadvertently missed the deadline. The seller sent a letter saying they were terminating the contract because I missed the deadline. He will not accept my second deposit now. I know it is just because he can sell the house at a higher price. Can he get away with this? — Barbra

A: The answer to your question will depend on several factors, the most significant variable being what your purchase contract says.

As with all disputes about a written agreement, your first step is to carefully review your contract to see what it says on the issue. Most contracts I have seen will contain a clause stating, “Time is of the essence.” If your agreement also does, it means that any failure to act within the required time will be a breach of contract.

But just because you breached the contract does not necessarily mean the other side can cancel the agreement.

You will need to determine whether the breach was material or immaterial. A material breach is considered significant and harms the other party, while an immaterial breach is still technically outside of the agreement’s terms but does not affect the contract’s purpose. Because your contract has a time is of the essence clause, missing the deadline for the second deposit will be considered a material breach. Because you missed the payment and the seller called you out on it, it looks like your contract may be terminated.

You should consult with an experienced attorney to discuss your options.