A South Carolina court has considered whether a buyer who placed in escrow a small portion of the purchase price breached the contract, thereby allowing the sellers to void the purchase contract.
Audrey Windsor (“Buyer”) entered into a contract to purchase a home from Cecil and Jackie Brazell (“Sellers”). The purchase price for the property was $550,000. Shortly after closing, the Buyer informed the Sellers that the reverse osmosis system for the property was not working and so the Buyer had $2000 of the purchase price held in escrow to cover the costs for repairing the system. The Buyer’s attorney prepared an agreement on how the escrowed funds would be used to repair the reverse osmosis system.
The Sellers refused to cash the check containing the sale proceeds minus $2000 and also refused to execute the escrow agreement. The Sellers filed a lawsuit, arguing that the Buyer had breached the contract by failing to tender the full purchase price and the Sellers sought the rescission (or, cancellation) of the contract. The trial court dismissed the lawsuit, and the Sellers appealed.
The South Carolina Court of Appeals affirmed the trial court. To order rescission, a court must find evidence that a party breached the contract in “so substantial and fundamental” way that the entire purpose of the contract was defeated. Rescission is generally not available for minor contract breaches.
The court found that the evidence in this case did not support an award of rescission. The alleged minor breach of withholding $2000 from a $550,000 contract (or, less than .04% of the purchase price) did not constitute a sufficient enough breach to warrant the cancellation of the contract. Additionally, the Buyer wasn’t refusing to pay the $2000; instead, the Buyer paid the $2000 into an escrow account for repairs. Thus, the court affirmed the trial court.
Brazell v. Windsor, No. 4309, 2007 WL 3375062 (S.C. Ct. App. Nov. 8,2007) aff’d, 376 S.C. 83, 655 S.E.2d 736, Reversed by 384 S.C. 512, 682 S.E.2d 824 (S.C. Sep 08, 2009) (NO. 26715), rehearing denied (Oct 07, 2009)
Editor’s Note: NAR Legal Affairs would like to thank George Cox of the Cox Law Firm, P.C., for alerting us to this opinion.