Contracts Keyed to Knapp
Crabby’s Inc. v. Hamilton
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A restaurant and the land on which it was, was put up for sale by Crabby’s Inc. (Seller) (P) while Hamilton and Paragon Ventures, L.L.C. (collectively, Buyers (D)) (D) agreed to buy the property at a cost of $290,000. Included in the contract was a financing contingency provision that made it contingent on “Buyer’s [sic] ability to obtain a conventional loan or loans in the amount of $232,000, redeemable over a period of not less than 15 years and bearing interest at a rate of not more than 5.5% per annum”.Also specified in the contract agreement was that Buyers (D) would use reasonable diligence in seeking to obtain a loan or loans and that they must furnish the seller with a written loan commitment within 30 days from the contract’s effective date or else the contract would be terminated automatically. The loan application of the Buyers (D) was successful and the bank agreed to loan the Buyers (D) $225,000 to be amortized over a period of 15 years on the real estate, $65,000 amortized over 7 years on the equipment and a $50,000 revolving line of credit, all at the interest rate of prime plus 1.5%Although the Buyers (D) did not apply for the loans elsewhere, they did not provide the sellers with a written loan commitment as stipulated in the agreement within the 30 days framework of the effective day of the contract. The parties to the contract extended the closing date of the contract for a period of two weeks to give room for repairs but this did not alter the contract terms. A credit of $1,373.53 against the purchase price was also given to the buyer. A second extension, well over two weeks was also granted to the Buyers (D) and the Buyers (D) were allowed to take possession of the property prior to the closing of the contract to enable them to start cleaning. The seller also gave to key to the buyer, who took possession of the property. All documents incidental to taking possession of the property had been concluded.But two days to the closing date, Buyers (D) cancelled the contract and purchased a different restaurant at a cost of $170,000. Seller eventually sold the property for $235,000 eleven months after he intended to close the contract with Buyers (D). Seller now brought a breach of contract suit against buyer and sought damages equal to the difference between Buyers (D) $290,000 contract price and the $235,000 price at which the property was eventually sold. The trial court gave judgment in favor of seller by awarding a $95,547 damages against Buyers (D). The appeal of buyer against this judgment was that the court erred in its findings, arguing that by its terms the contract was null and void when they failed to provide seller with a copy of an effective loan commitment as stipulated in the contract. Seller on the other hand maintained that the court did not err in awarding the damages against the Buyers (D). However, the state’s intermediate appellate court granted review.
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