Timing is Everything

5.5.10    By Joe Kelly    Tags

Prospective home buyers entered into a contract with a construction company for purchase of a home and construction of garage (to take place after closing). The buyers were to pay an additional $10,200 for the garage. A letter was subsequently prepared by the construction company specifying a time for the buyers to tender payment for the garage (30 days after closing). The buyers signed the letter but only after making a handwritten change to the timeframe to state the time for payment was 90 days after closing.

The buyers had trouble getting financing (for what turned out to be errors in their credit report). By the time the buyers corrected the credit report and secured financing to pay for the garage, it was a full year after the closing. When the buyers asked the construction company to start work on the garage, the construction company stated that the cost of materials had increased and refused to do it for less than $29,540.00 (which evidence indicated was market price for a garage of the type called for in the contract). Buyers sued.

The trial court treated the letter as a clarification to the contract and ruled for the construction company because the buyers had not closed within 90 days as required by the buyers’ own change to the letter. The Court of Appeals reversed, finding that the letter did not reflect a meeting of minds between the parties because the construction company had never signed off on the revised version of the letter. Thus, it was of no use in determining the obligations of the parties under the contract.

However, this holding still did not help the buyers. The Court determined that, even though the contract itself had no timeframe for payment, the Court could imply a reasonable time period for payment — 90 days from closing on the home. The buyers’ failure to tender payment within this 90-day period was a material breach of the contract, therefore, the construction company was not liable.

For more information, see Gerulis v. Jacobus, et al., 2010 WL 1644991 (Tenn. Ct. App. Mar. 23, 2010).


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