Pittman v. Canham
2 Cal. App. 4th 556, 3 Cal. Rptr. 2d 340, 92 Daily Journal DAR 348 (1992)
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Rule of Law:
In a contract with concurrent conditions and a 'time is of the essence' clause, the failure of both parties to tender performance by the specified closing date automatically discharges both parties' contractual duties.
Facts:
- In November 1987, Jeffrey A. Pittman, a real estate broker, entered into a contract to purchase a 56-acre parcel of land from Lily V. Canham for $250,000.
- The contract, drafted by Pittman, stipulated that 'Time is of the essence' and set a closing date of December 24, 1987.
- Pittman's obligation was to deposit an additional $24,000 in cash, along with a promissory note and deed of trust, into escrow.
- Canham's concurrent obligation was to deposit a valid, recordable deed to the property into escrow.
- Canham provided a signed but unnotarized deed to the escrow company.
- The December 24, 1987, closing date passed without Pittman tendering the required funds and documents, and without Canham tendering a notarized deed.
- In March 1988, Canham informed Pittman she now wanted a higher price for the property.
- In May 1988, Canham sold the property to different buyers for $600,000.
Procedural Posture:
- Jeffrey A. Pittman sued Lily V. Canham for breach of contract in the trial court.
- At the conclusion of Pittman's case-in-chief at trial, Canham moved for a judgment of nonsuit.
- The trial court reserved its ruling on the motion until after all evidence was presented.
- Following the presentation of all evidence, the trial court granted Canham's motion for nonsuit.
- The trial court also issued a statement of decision, finding that Pittman had defaulted and Canham had not waived the time for performance.
- Pittman (appellant) appealed the trial court's judgment to the Court of Appeal (an intermediate appellate court).
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Issue:
Where a real estate contract contains concurrent conditions and a 'time is of the essence' clause, is the contract automatically discharged if neither the buyer nor the seller tenders performance by the closing date?
Opinions:
Majority - Gilbert, J.
Yes. Where a contract specifies that time is of the essence and includes concurrent conditions, the contract is discharged if neither party tenders performance by the deadline. The court reasoned that concurrent conditions are mutually dependent obligations. When time is essential, the failure of both parties to perform their respective obligations by the specified date results in a discharge of both parties' duties. Neither party can subsequently hold the other in default because the contract effectively terminated at the expiration of the deadline. The court distinguished this from cases involving a waiver of the time condition or where one party's performance is a necessary precedent to the other's, neither of which applied here. The escrow instruction allowing the escrow to close if the parties later complied did not unilaterally extend the deadline but merely instructed the escrow agent not to cancel on its own initiative.
Analysis:
This case establishes a clear and strict rule for contracts containing both concurrent conditions and a 'time is of the essence' clause. It prevents a contractual stalemate where parties wait indefinitely for the other to perform first after a deadline has passed. The decision emphasizes that 'time is of the essence' is not mere boilerplate; it creates a firm termination point for the parties' obligations. For future transactions, this precedent compels parties who wish to proceed after a missed deadline to secure a formal, written extension, as the original contract is considered discharged by operation of law.
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