Beverly Way Associates v. Barham

In Beverly Way Associates v. Barham (1990) 226 Cal.App.3d 49, a contract to purchase an apartment building made buyer's duty to perform conditional upon buyer approving a property survey. (Id., at p. 52.) After receiving the survey, buyer sent a letter to seller stating, "'We reluctantly disapprove of the matters disclosed on the Survey. . . .'" (Id., at p. 53.) In the letter, buyer also proposed other terms that might "'keep the deal alive.'" (Ibid.) There was no further communication between buyer and seller until two months later, when buyer sent a second letter to seller stating that buyer would waive objections to the survey and proceed with the sale. (Ibid.) Seller was no longer interested in proceeding and canceled the escrow, and buyer sued for breach of contract. (Id., at pp. 53-54.) On appeal, the court concluded that the buyer's option to cancel the contract based on disapproval of the survey was a condition precedent under Civil Code section 1436. (Beverly Way, supra, 226 Cal.App.3d at p. 54.) Further, the court held that where a party has the power to approve or disapprove a condition precedent, that power should be treated under the law as a formal option. (Id., at p. 55.) The right to exercise an option is lost once it is rejected, even if a later attempt at exercising occurs within the original time prescribed for it. (Id., at pp. 55-56.)