MONEY DAMAGES

If one side breaches his, her or its obligations under a real estate contract, refuses to complete the contract, the other party can sue.  If the lawsuit is successful, there are three types of relief which the court could award.  The first is money damages.  The basic idea is that enough money should be awarded to put the aggrieved party into the same position as if the contract had been carried out.

As a rule, the largest item of money damages will be any difference between the contract price and the market price, at the time of breach.  If the buyer agreed to pay more than the property was worth, and then refuses to complete the deal, the seller can recover the difference in price.  If the seller agreed to sell for less than market value, and then reneges on the deal, the buyer can recover the difference in price.  If the contract price equaled the market value, then neither side can recover lost profits.

In addition, either side can recover for out of pocket expenses incurred in reliance upon the contract.  For example, the non-breaching party paid to investigate title or to prepare the sale documents, he or she can recover for this.

The non-breaching party can also recover for all “consequential damages” meaning any damages, which reasonably flowed from the other party’s breach of the contract.  Lets say, for example, that Mr. Smith is buying a house in Los Angeles, because he is moving from New York for a new job.  If the seller refuses to sell, then Mr. Smith might be able to recover the expenses of renting an apartment while he looked for another property to buy.  In theory, “consequential damages” are an open-ended category, which can include any number of items.  The courts, however, limit such damages by the rule that they must be reasonable, foreseeable and not speculative.

The non-breaching party is also entitled to interest on his or her damages, for the period between the breach of contract and the judgment by the court.  California Civil Code Section 3287.

Unless something is involved beyond a simple breach of contract, neither party can recover for emotional distress or punitive damages.

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