“Specifically Perform This” Says David McDavid

How can something so beautifully simple as a written contract become so confused that it takes from 1997 to 2002 to decide whether there is or is not a contract via litigation? Make the subject of the contract real estate, and amend it with several oral agreements.

If most lawyers had their choice, they would almost always choose certainty over doubt. (Actually this might not apply to trial lawyers, who generally look for ways to muck things up.) We real estate types have a major weapon on our side: the Statute of Frauds requires that certain types of agreements must be in writing to be enforceable. On top of that list are agreements relating to real estate.

And so, in accordance with the Statute of Frauds, and on recommendation of their respective lawyers, on February 25, 1997, David McDavid and 17090 Parkway, Ltd. signed a written contract for the sale of an office building. The closing date was set at March 31, 1997, and the contract provided “Time is of the essence.” This provision is very important in real estate contracts; it means that performance must occur within the specified time and if it does not, the other party may enforce the contract by specific performance.

Well, time must not have really been of the essence after all, at least not literally. Parkway and McDavid orally agreed to extend the contract to April 14, 1997. Both parties dutifully got their lawyers to draft up a written amendment stating such, which both parties signed. The amendment also allowed an additional extension to April 30, 1997, upon McDavid’s payment of another $50,000 earnest money. So far, so good. But it only goes downhill from here.

Parkway allowed McDavid to extend the contract from April 14 to April 30 with payment of only $25,000. Then the parties again orally agreed the contract could be further extended to May 30 upon payment of an additional $75,000 in earnest money. And on or prior to April 30, both parties yet again dutifully got their lawyers involved to draft up the written amendment, but this time the check got cashed first, and then Parkway marked up some changes to the amendment and sent it back to McDavid’s lawyer. McDavid’s lawyer approved and made the changes, and delivered the revised agreement to McDavid.

Then the train came off the tracks. The parties never signed this second amendment. And in just a few short days, on May 13, 1997, Parkway delivered a letter to McDavid claiming that the contract terminated on April 30, 1997. Never mind that Parkway still held the $75,000 extra earnest money that had been paid at the same time the agreement was reached.

Well, McDavid not only didn’t necessarily want its $75,000 back, but it wanted the property. And when dealing with real property, specific performance of the contract is an available remedy. Specific performance is where the court orders the parties to complete the transaction.

With few good options, on May 30, 1997, McDavid filed a lawsuit against Parkway for specific performance of this agreement. Of course, the first question was, “what’s the agreement?” And in order to prove the agreement, both McDavid’s lawyer and Parkway’s lawyer who participated in negotiating and drafting the agreement and various amendments, had to testify. The Court of Appeals’ opinion states: “The parties’ attorneys….testified as to their correspondence with one another regarding a draft amendment memorializing the oral agreement between [McDavid] and [Parkway]. Their written correspondence and drafts of the amendment were introduced into evidence.

At trial the jury found that Parkway’s actions waived the “time is of the essence” requirement owed by McDavid, and since that provision was no longer effective against McDavid, McDavid was not in breach, had an enforceable contract, and was entitled to specific performance against Parkway. And it only took the case just over 5 years (and probably a whole bunch of attorneys fees) to be decided. All because the parties didn’t sign an amendment that they instructed their lawyers to prepare.

What can be learned from such lunacy, you may ask. I see at least the following lessons:

1. What you do affects what you write, and may change its meaning and effect altogether. Keep your lawyer involved as you perform your written contracts; and

2. Sign the documents your lawyer asks you to sign in a timely manner. It’s one of those “help me help you” matters.

17090 Parkway, Ltd., v. David McDavid, Case No. 05-00-1-01362-C (Tex. App.-Dallas, June 18, 2002)

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