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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 6, 2020

Buyer Attorney Letter Refusing to Close on Real Estate Transaction Based on Mistaken View That Seller Had Breach Constituted Anticipatory Breach

On December 18, 2019, the Second Department issued a decision in Lamarche Food Prods. Corp. v. 438 Union, LLC, 2019 NY Slip Op. 08995, holding that a letter from a buyer’s attorney refusing to close on a real estate transaction based on the mistaken view that the seller had breached the sale agreement constituted an anticipatory breach of the sale agreement, explaining:

By letter dated June 23, 2017, a new attorney for the defendant informed the plaintiffs’ attorney that Lamarche Food had defaulted on its obligations under the contract of sale inasmuch as it had represented therein that it was a New York corporation authorized to carry on its business in New York, with all the power and authority to enter into and perform the contract, and yet Lamarche Food was dissolved on June 24, 1992, and, therefore, was not a registered corporation in New York capable of engaging in new business. The defendant’s attorney further stated that in light of the breach, the defendant demanded a refund of its deposit within 10 days. The plaintiffs’ attorney responded by email dated June 23, 2017, stating that Lamarche Food was prepared to close on June 26, 2017, pursuant to the terms of the contract, and a failure to close on that date would be deemed a default by the defendant. It is undisputed that the closing did not occur.

. . .

A dissolved corporation may continue to function for the purpose of winding up the affairs of the corporation. On appeal, the defendant does not dispute that Lamarche Food could continue to function for the purpose of selling the subject property as part of its winding up of the corporation’s affairs. Rather, the defendant contends that its June 23, 2017, letter to the plaintiffs’ attorney did not constitute an anticipatory breach of the contract of sale. An anticipatory breach of contract by a promisor is a repudiation of a contractual duty before the time fixed in the contract for performance has arrived. For an anticipatory repudiation to be deemed to have occurred, the expression of intent not to perform by the repudiator must be positive and unequivocal. We agree with the Supreme Court’s determination that the June 23, 2017, letter reflected a positive and unequivocal repudiation of the contract by the defendant, thereby, under the terms of the contract, entitling the plaintiffs to retain the deposit as liquidated damages for the defendant’s anticipatory breach.

(Internal quotations and citations omitted).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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