101123 LLC v. Solis Realty LLC
In 101123 LLC v. Solis Realty LLC (23 AD3d 107 [1st Dept 2005]) the parties entered into a contract of sale pursuant to which defendant agreed to sell an apartment building to plaintiff 101123 LLC. The contract of sale contained a restricted remedies clause that was virtually identical to agreement 11 (a) as follows:
"If Seller is . . . unable to convey title in accordance with the terms of this Contract, then Purchaser may elect either (I) to terminate this Contract, or (ii) to accept such title as Seller may convey and shall complete the transaction as otherwise contemplated by this Contract, but in no event shall Purchaser be entitled to any abatement of the Purchase Price or to any lost profits or other damages, deduction, offset or credit." (101123 LLC, 23 AD3d at 108.)
Similar to agreement 20, the contract of sale in 101123 LLC also contained a provision governing seller defaults:
"In the event that Seller . . . defaults under the terms of this Contract, the sole liability of Seller will be to instruct the Escrow Agent to return to Purchaser the Contract Deposit, together with any interest earned thereon, and pay the net title examination costs, without policy, and upon such return being made this Contract shall automatically terminate and be deemed cancelled, and neither party shall thereafter have any further liability or obligation to the other hereunder; provided, however, that if Seller wilfully defaults under this Contract and fails to close on the sale of the Premises in accordance with the terms of this Contract, Purchaser shall have the right to bring an action for specific performance against Seller and exercise any other remedies at law or in equity." (Id. at 108-109.)
Plaintiff in that case was unable to deliver title to the subject premises in accordance with the terms of the contract of sale. The question decided by the Appellate Division, First Department was "whether the buyer is limited to the remedies provided for in the parties' contract, entitling it only to either take the property as it was or to rescind the contract, and precluding specific performance except in the event the seller willfully defaulted on its contractual obligations" (id. at 110).
The Court held that "when a contract for the sale of real property contains a clause specifically setting forth the remedies available to the buyer if the seller is unable to satisfy a stated condition, fundamental rules of contract construction and enforcement require that we limit the buyer to the remedies for which it provided in the sale contract" (id. at 108).