Who Really Breached the Contract

You may consider suing for breach of contract if you believe another party to your contract did not behave as required of them under the contract. Breach of contract cases can be difficult because it is not always clear whether someone breached a contract. It is possible for parties to reasonably interpret the same terms differently, leading one party to believe there is a breach while the other thinks everything is fine.

Take for example the New York case of Smith v. Realty USA-Capital Dist. Agency Inc. In this case, Doreen Smith (Smith) is suing Realty USA-Capital District Agency and Henry C. Meier (Meier) for breach of contract. Smith signed an agreement to purchase Meier’s home. She put down a ten thousand dollar down payment, which was placed in escrow while she had the property reviewed for structural deficiencies. Once the inspection was completed, a report was issued indicating that there were certain "major defects." After receiving the report, Smith notified Meier that the contract was deemed cancelled and demanded that he return the deposit. When Meier refused, Smith commenced this action to recover the deposit.

Smith believed the contract was cancelled and that she was owed her deposit back because of the findings of the inspection. The inspection report listed a number of major defects, each of which the company believed would cost approximately one thousand five hundred dollars to fix. Under the purchase agreement, there was a provision which provided details regarding structural inspections, including a definition for a “major defect,” as well as the steps Smith would need to take to fix the issue or cancel the contract.

Meier did not believe the structural issues were to the level of a “major defect.” Part of the inspection report included a clause stating the findings were not official estimates. This disclaimer was the basis of Meier refusal to cancel the contract and not return Smith’s money to her. He believed she was required to get an official estimate.

The court disagreed. The court found that Smith was entitled to rely on the initial report in canceling the contract, without having to pursue additional repair estimates. Whether the repairs ultimately may have been completed for less than one thousand five hundred dollars is not the point. This contract allowed Smith to cancel the agreement where a qualified inspector identified substantial defects that would reasonably cost over one thousand five hundred dollars to correct. At no point were the qualifications of the inspector at issue, therefore Smith’s choice to cancel the contract was deemed valid.

As this case demonstrates, having a breach of contract attorney to review your contracts before you sign them can be helpful. An attorney can cover the details with you so you know what you are agreeing to. An attorney can also be useful at any point before trial to help you decide whether you want to go through with a trial or settle outside of court. If you have a contract issue please contact our office.

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