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You Cannot Cancel a Contract Based On Your Own B

You Cannot Cancel a Contract Based On Your Own B

When a contract breach happens the other, non-breaching party to the agreement has the option of going to court to get compensation for the incomplete contract. When a contract is breached, your options in court are to either ask for the contract to be enforced or to be cancelled. The best option depends on your circumstances. Breach of contract cases can be difficult because they are based on timing. You may only bring a breach of contract case if, at the time the other party breached the contract, you completed as much of your responsibilities as was reasonable at that point in time. If your actions, or lack of action, cause the other party to breach the contract in some way, you will not be treated as the non-breaching party and, therefore, would not have the right to end the contract without liability. Arguments about timing frequently pop up in these cases.

Take for example the New York case of Island Estates Mgt., Inc. v. MBA-Manorhaven, LLC. In this case, Island Estates Management (Island) sued MBA-Manorhaven (MBA) for breach of contract because MBA failed to complete its portion of the contract and then cancelled their real estate contract prematurely. The contract between Island and MBA was extensive, providing both time limits and milestones, options for the seller to cancel the contract if expectations were not met and options for the buyer to keep the contract going if milestones were not met due to circumstances outside its control. MBA claimed that Island was unable to close the sale within the agreed upon time, therefore, based on its rights within the contract, MBA chose to end the contract. Island claimed it was unable to close the contract on time because of MBA’s actions, and therefore MBA should not have the right to cancel and the contract should be enforced.

Like most contracts, there were set expectations for both parties that were required for the contract to be completed properly. It was MBA’s responsibility to take all commercially reasonable actions to remediate the environmental conditions on the property and obtain a "No Further Action Letter" from the DEC. MBA was responsible for the environmental cleanup but had the option to cancel the contract if the total price of cleanup surpassed two million dollars. Three years into the cleanup MBA claimed the costs were too high and that it would cancel the contract. Island enforced its option to pay for any costs over two million dollars and asked MBA to continue with the clean up.

Island claimed that MBA was less than diligent in remediating the environmental conditions, and therefore breached the contract. This claim was partially based on a letter from the DEC which said the MBA spent more time arguing about the necessary extent of clean up than the actual clean up. The closing was conditioned upon Island obtaining final approval of its Special Use Permit and Site Plan and the final approval of these items is conditioned upon remediation of the environmental conditions. Therefore, the contract could not end until the cleanup was complete and that was not only outside Island’s control, but it was the responsibility of MBA. At the time the suit was brought, MBA was still overseeing the clean up.

Previous New York case law has decided that a party cannot use its own breach of a contract as a basis for cancelling a contract. The court found the claims to be valid but needed more time and information to decide whether MBA’s actions reached the level of breaching the contract and set a date for another hearing.

Litigation is complicated and time consuming, if you have a contract dispute an attorney may help you find your best option to resolve it. if you have a contractual issue or are thinking about litigation, please contact our office.

See Related Posts:

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Who Really Breached the Contract?

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