Ability to Perform in an Action to Enforce a Sale of Property in California

Ability to perform is an essential element of an action to specifically enforce a sale of property. (E.g., Behniwal v. Mix (2005) 133 Cal.App.4th 1027, 1044; C. Robert Nattress & Associates v. CIDCO (1986) 184 Cal.App.3d 55, 64, 229 Cal. Rptr. 33.) "A buyer seeking specific performance of a contract for the sale of realty has the burden of both pleading and proving that he was ready, willing and able to perform the contract. Where plaintiff's action for specific performance is based upon defendant's breach by anticipatory repudiation, plaintiff must still show that he was ready and able to perform; the only effect of the repudiation is to excuse the plaintiff from the usual duty of making a tender." (Am-Cal Investment Co. v. Sharlyn Estates, Inc. (1967) 255 Cal.App.2d 526, 539, 63 Cal. Rptr. 518 (Am-Cal Investment).) In Am-Cal Investment, the court explained that the buyer need not have his own funds to establish ability to perform. The court stated: "A purchaser without funds of his own may show that he was ready and able to pay the purchase price because he had made arrangements to borrow the required funds from a lending institution or from a third party, but if he relies upon the negotiation of a loan from a third party, the buyer must prove: (1) That the third party was legally bound by contract to advance the funds . . . and (2) '. . . that the party offering to advance the purchase price has the financial ability so to do . . . .'" (Id. at pp. 539-540.) In Henry v. Sharma (1984) 154 Cal.App.3d 665, the court rejected the notion that Am-Cal Investment stands for the proposition that proof of an existing legally enforceable loan contract is necessary to establish that a buyer is ready, willing and able to perform under a real estate purchase agreement. (Henry, supra, at p. 672 "we find no support for the iron-clad rule suggested by seller that plaintiffs could only establish ability to perform by proving they had obtained a legally enforceable loan contract".) As explained in Henry: "Neither Am-Cal Investment nor the case it relies on, Merzoian v. Kludjian (1920) 183 Cal. 422, 429-430, held that evidence of a binding loan commitment is the exclusive means of proving ability to perform. To the contrary, Am-Cal Investment states, 'The buyer's financial ability may be proved by showing the purchaser had liquid assets, property which would be sold and the proceeds used as collateral for a loan, or an actual loan commitment . . . .'" (Henry, supra, at p. 671; see also Merzoian v. Kludjian (1920) 183 Cal. 422, 430 proof of ability to perform may be made either by showing the buyer had funds in hand or that he "commanded resources upon which he could obtain the requisite credit".) In other words, the "proof needed to show ability to perform depends not on the existence of a legally enforceable loan agreement, but on all the surrounding circumstances." (Henry, supra, at p. 672; accord, WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1716.)