Time is of the essence clause; Breach of contract; Specific performance; Venue; Notice
By: Diana Ricaurte | Staff Writer
On or about December 17, 2015, Plaintiff buyer and Defendant seller entered into a contract for the sale of a commercial property. Subsequently, the parties discussed a closing date, and Plaintiff proffered a down payment. When Plaintiff ran a title search on the subject property, he discovered judgments and violations against the property. Later, Defendant’s attorney contacted Plaintiff’s attorney and suggested that Defendant sought to renegotiate the sale price as a result of the judgments and liens against the property. During the conversation, Defendant’s attorney limited responsibility regarding the liens, while Plaintiff argued that Defendant was responsible because the liens were encumbrances.
Months later, Plaintiff’s attorney sent Defendant’s counsel two “time is of the essence” (“TIOTE”) letters discussing the sale. The first dated on March 11, 2016 and the second on March 30, 2016. In the March 30 TIOTE letter, Plaintiff’s counsel set a new closing date and warned Defendant’s attorney that failure to close on such new date would result in a breach of contract entitling Plaintiff to remedies at law and equity. Defendant’s attorney, however, disagreed and stated that the TIOTE was untimely and invalid under the contract. Ultimately, Defendant did not abide by the new closing date or the TIOTE.
Plaintiff commenced this action claiming breach of contract and specific performance on the basis that Defendant failed to follow the TIOTE letter instructions. In response, Defendant moved for summary judgment arguing that the March 30 TIOTE was defective. Specifically, Defendant contended that: (1) the TIOTE was not served properly under the specifications of the contract; (2) the TIOTE failed to comply with the proper venue for closing under the contract; (3) the TIOTE failed to provide Defendant reasonable time to comply with the obligations. Defendant’s attorney argued that Plaintiff’s attorney failed to comply with the contractual provisions by only sending the TIOTE to Defendant’s counsel and not to Defendant as well.
The Court denied Defendant’s motion for summary judgment and held that the notice for a TIOTE was proper when it (1) provides clear, distinct, and unequivocal notice, (2) provides the other party reasonable time to perform its obligations, and (3) warns the other party that failure to perform by the stipulated date will constitute a default under the terms of the contract.
First, the Court held that strict compliance with notice was not required so long as the adverse party was not prejudiced by not receiving the TIOTE. An adverse party is prejudiced in the context of notice when a failure to submit an actual notice will submit the party to breach a contractual notice. Here, Defendant was not prejudiced because his attorney received the TIOTE. Thus, the parties were put on actual notice.
Second, the Court rejected Defendant’s improper venue allegation. The parties to a contract may agree to a venue for future disputes. Minor deviations from such venue, however, may not be material or prejudicial. Here, the deviation was minor because irrespective of where the closing took place, Defendant was required to travel to New York to attend the closing anyway. Thus, the Court opined that having the closing at the Defendant’s or Plaintiff’s attorney’s office was not a significant deviation.
Third, the Court held that Defendant had reasonable time to comply with the TIOTE. Reasonable time to comply is fact specific. However, if a party is not offered reasonable time to perform it will amount to nullity. Here, the Court found that Plaintiff’s counsel gave Defendant’s attorney three-month notice to resolve the lien and judgment payments. Because Defendant’s counsel failed to demonstrate a lack of reasonable time, Defendant was not entitled to summary judgment.
11-01 36 Avenue LLC v. Shehzad Quamar a/k/a Qyanar Shehzad, Roma Shukla a/k/a Shukla Roma, and Paul Stamatelatos, as Escrow Agent, Index No. 704865/2016, 11/28/2016 (Ritholtz, J.).