Tag Archives: modification

QUICK NOTE: PURCHASE-AND-SALE CONTRACTS AND THREE POINTERS

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When you enter into a purchase-and-sale contract for real estate, keep in mind that you can modify the contract to include terms particular to the transaction.  These modifications can be important if an issue arises such as if closing does not timely occur.  In a new case, discussed here, three noteworthy pointers can be found below:

 

 

 

  1. Including an addendum with a drop-dead closing date can be valuable to a buyer and seller because it prevents any excuse to the closing date. For example, if the seller cannot deliver marketable title by this drop-dead date, the buyer has the option to terminate the contract.  However, the addendum can include any modification or provision important to you for purposes of the transaction.
  2. The arguments of waiver and estoppel are very difficult arguments to raise when it comes to real estate contracts. This is because: (a) the contract will provide that modifications to it must be in writing and signed by the parties, and (b) the statute of frauds requires contracts relating to real estate transactions to be in writing and signed by the party to be charged.   In other words, if the objective is to modify the contract, that modification needs to be in writing and signed otherwise the statute of frauds and the contract itself can bar that argument.
  3. A lis pendens does create a cloud on title. Thus, if you purchase a property with a lis pendens, this prevents the seller from delivering marketable title to you as the buyer.  A lis pendens remains a cloud on title until the appellate time period expires as it pertains to any order to discharge the lis pendens.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

DIFFERENCE BETWEEN A NOVATION AND A MODIFICATION TO A CONTRACT

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In contract law, there are two doctrines that have similarities but are indeed different. These doctrines are known as novation and modification.   There are times you may want to make arguments relative to these doctrines because they are important for your theory of the dispute.  Thus, you want to make sure you understand them so you can properly plead and prove the required elements to substantiate the basis of the theories.  Understanding the elements will help you understand the evidence you will need to best prove your factual theories.

A novation is essentially substituting a new contract for an old contract.

“‘A novation is a mutual agreement between the parties for the discharge of a valid existing obligation by the substitution of a new valid obligation.’” Thompson v. Jared Kane Co., Inc., 872 So.2d 356, 361 (Fla. 2d DCA 2004) (citation omitted).   To prove a novation, a party must prove four elements: “(1) the existence of a previously valid contract; (2) the agreement of the parties to cancel the first contract; (3) the agreement of the parties that the second contract replace the first; and (4) the validity of the second contract.”  Id. at 61.  Whether the parties consented to the substitute contract can be implied from the factual circumstances.  Id.

Parties are more familiar with a modification because it is not uncommon that parties may agree to modify contractual terms. The contract remains in effect but certain terms or obligations are modified.  For example, a change order to a contract is a modification.

A modification, unlike a novation, “merely replaces some of the terms of a valid and existing agreement while keeping those not abrogated by the modification in effect.”  Bornstein v. Marcus, 275 So.3d 636, 639 (Fla. 3d DCA 2019).

When determining the scope of a modification to a contract, the following principles control: (1) “individual terms of a contract are not to be considered in isolation, but as a whole and in relation to one another”; (2) “the proper resolution of any inconsistency … is best determined by the manner in which the parties actually perform under it”; and (3) “an amendment to an agreement is designed to serve some useful function, and its existence is strong evidence, therefore, that the contract was changed from what the parties believed and intended was provided before.”

Marcus, supra, at 640 (citations omitted).

Remember, there is a difference between a modification and a novation.  Understanding this distinction may come into play in a dispute you have relative to a contract you entered into.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.