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A Rose is a Rose is a Rose, But When is a Sale Not a Sale in a Florida Commercial Contract?

A few decades ago, a U.S. president once famously responded to a question under oath by noting that “it depends on what the meaning of ‘is’ is.” Whatever one’s opinions of that statement, the reality is that, in the law, sometimes the outcomes of disputes hinge upon small phrases or even single words, and the very precise definition of those terms. That is especially true when it comes to commercial contracts and commercial litigation. That is why you should make sure you have highly skilled Florida business and commercial attorneys to meet your commercial contract needs.

As an example, take a recent case that originated in Palm Beach County. A real estate contract called for the making of payment if one of a list of several triggers took place. The first of those criteria was a “sale of the property’ at a designated street address. Eventually, the property in question was sold… at a foreclosure sale.

The party scheduled to receive payment under the contract argued that this was a valid trigger and payment was owed. The party owing payment contended it was not and refused to make the payment. The case went to trial and the singular key to the outcome was: what did the contract mean when it said “sale of the property”? Did that term include any sale or did it implicitly exclude involuntary sales like foreclosure sales? More specifically, was it clear what the contract meant? If it was not, then the parties were entitled to bring in outside “parol evidence” at trial. If it was clear, then outside evidence was inadmissible.

The trial court concluded that the word “sale” as it appeared in this contract contained a latent ambiguity, which meant that the parties were allowed to bring in outside evidence. At the end of the trial, the court concluded that an involuntary sale was not a trigger and that no payment was due.

The court of appeal, however, reversed that decision and issued an opinion in favor of the party seeking payment. In this dispute, there was “no extrinsic fact or extraneous circumstance that changed the parties’ understanding of the contract. “ When that is true, then the law requires courts to look to the common dictionary definitions for the “plain and ordinary meaning” of the word in question.

The appeals court noted that Black’s Law Dictionary defined “sale” as the “transfer of property or title for a price.” That dictionary also defined “foreclosure sale” as a “sale of mortgaged property… to satisfy a debt.” It was clear from these definitions, then, that the common and ordinary meaning of sale was any transfer of title, whether voluntary or involuntary, foreclosure sales included.

In the absence of any qualifying language detailing what would or would not trigger the “sale” criterion (which this contract lacked), any sale triggered the payment obligation. If the party owing the payment obligation wished not to have to pay upon the completion of a foreclosure sale, it should have negotiated for an additional provision that expressly excluded involuntary sales.

So, when is a sale not a sale? When the contractual parties include specific language that expressly limits which sales qualify and which don’t. As with most contracts, it all comes down to negotiating the best possible deal and then being sure that you get a contract that accurately reflects that deal. For reliable advice and effective advocacy in all of your business litigation needs, contact the skilled South Florida commercial litigation attorneys at Stok Folk + Kon. Our experienced team has been skillfully helping clients protect their business interests for many years.

Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.

More blog posts:

Contractual Limitations Period Stymies Swiss Trust’s Breach of Contract Lawsuit Against American Bank, Florida Business Lawyers Blog, May 7, 2018

Unresolved Factual Disputes Trigger Reversal of $776K Judgment in South Florida Contract Breach Case, Florida Business Lawyers Blog, Dec. 21, 2017