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Contract Addendum Establishes Agreement as Unambiguous, Defeats Need for Extrinsic Evidence in Real Estate Dispute

In many commercial real estate disputes, the center of the case involves exactly what the parties did, or did not, agree to. If this issue proceeds to trial, a party’s success or failure may revolve around whether or not the law allows the trial court to consider evidence other than the terms of the contract itself. This was the case in one real estate deal gone wrong, as the 3rd District Court of Appeal reversed a decision in favor of the buyer, ruling the trial court relied on outside evidence when it should have restricted evidence to the parties’ agreement itself.

The dispute revolved around a sale of a 92-acre piece of real estate from Francis Dirico to Redland Estates, Inc. The parties set the deposit at $200,000. The parties continued to push back the closing date several times through a series of contract addenda. With each addendum, the seller required the buyer to pay an additional deposit. A second addendum set a $250,000 deposit for extending from April to June, and a third established a $200,000 deposit for extending from June to October. The third addendum called for the seller to pay the $200,000 amount in equal monthly installments of $50,000 and to receive credit for each of those payments made.

The buyer’s closing statement reflected credit for $688,000 in deposits paid, while the seller’s closing statement gave the buyer credit for only $200,000. The buyer refused to close. Dirico kept the buyer’s deposits, and Redland sued. The trial court agreed with the buyer that the parties’ contracts were ambiguous and permitted the two sides to introduce external evidence to clarify the ambiguity in the agreement. Ultimately, the trial court ruled in favor of the buyer and ordered the seller to pay $1.3 million.

On appeal, the seller argued that the contracts were not ambiguous and, as a result, the trial court never should have considered external evidence in interpreting the agreement’s meaning. The appeals court agreed. The court explained that ambiguity exists only when multiple interpretations of a contract exist and each interpretation is equally plausible.

In Dirico and Redland’s case, the various interpretations of the parties’ deal were not equally reasonable. The court pointed out that the second and third addenda clearly stated that the additional money that the seller demanded represented consideration for the extensions of time granted in order to allow the buyer more time to close on the property.

The most telling aspect of the agreement that supported this conclusion of a lack of ambiguity pertained to the credit language in the third addendum. That document expressly called for giving the buyer a credit for each of the four monthly $50,000 deposits, while all the previous documents were silent on the issue of credits. If the parties’ agreement had intended for the buyer to receive credit for all deposits, the parties would have had no reason to single out the monthly deposits in writing and provide that the buyer receive credits for them, the court reasoned.

As a result of this deduction, the court decided that the parties had an unambiguous agreement and the trial court should not have allowed extrinsic evidence into the case.

Commercial real estate transactions can involve many intricate details and important legal considerations, both during the negotiation process and in the event that a dispute arises and leads to litigation. To obtain the best in clear, helpful advice and aggresive representation, consult the Florida real estate attorneys at Stok Kon & Braverman. Our attorneys can guide you through every step of the process to help you reach a successful outcome.

Contact us online or by calling (954) 237-1777 to schedule your consultation.

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