Mark B. Kleinfeld Commercial Real Estate Law Blog on Lawyers.com

The opinion in Nacoochee Corp. v. Pickett, decided by a Florida appeals court and available at opinions.1dca.org/written/opinions2006/12-6-06/05-3675.pdf, includes an interesting interplay between a deposit clause in a land sale contract and a notice of default and cure clause. The contract at issued included a cure period provision would seem for defaults under the contract. In this case, the court held that the failure to make a required deposit on time was not subject to cure. The clauses at issue stated as follows (paraphrasing):

Ernest Money: Purchaser shall pay to the Escrow Agent, the sum of $20,000.00, said payment to be made within 5 business days of the Final Signing Date. In the event Purchaser has not terminated this Agreement on or before Sixty days after the Final Signing Date, $10,000 of the Earnest Money shall become non refundable for any reason except Seller non performance. After acceptance of the Property under Paragraph 7, an additional $10,000 of Earnest Money shall become non refundable except for Seller non performance. After acceptance of the Property under paragraph 7, Purchaser shall deposit $100,000 within 5 business days as Additional Earnest Money.

Default of Parties, Liquidated Damages: In the event Purchaser shall fail to perform its obligations of this Agreement and such failure is not cured within sixty (60) business days after notice from Seller, then Seller shall as its sole and exclusive remedy have the right to terminate this Agreement and receive the Earnest Money as full liquidated damages.

Paragraph 7 was a due diligence provision. The contract also had a time is of the essence clause. The appeals court determined that the failure by the Purchaser to timely make the earnest money deposits was not subject to the notice and cure provisions under the Default of Parties clause and constituted a material breach of the contract. The court’s opinion is available for your review at opinions.1dca.org/written/opinions2006/12-6-06/05-3675.pdf.