In 2005, a married couple signed a contract with a builder to purchase a unit in a condominium building that was being developed in a luxury resort community. The contract specified that the condominium would be built within two years, although the contract included a “force majeure” provision that allowed for delays under certain circumstances. The contract also specifically waived the buyers’ right to speculative, punitive, and special damages.
After the housing bubble burst the buyers had second thoughts about their decision to purchase the condominium unit. Wanting out of the deal, they seized upon the Interstate Land Sales Full Disclosure Act, a federal statute that has become, in the words of the court that heard their case, “an increasingly popular means of channeling [a] buyer’s remorse into a legal defense to a breach of contract claim.”
Just three weeks before the condominium was completed – ahead of the two-year deadline in the contract, in fact – the buyers gave the builder notice that they were terminating the contract because the builder had failed to provide them with a property report as required by the Disclosure Act They also demanded the return of the substantial deposit they had paid.
The builder refused, and a federal appellate court sided with the builder. The contract between the parties fit within an exemption set out in the Disclosure Act that applies to “the sale or Spring 2010 lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years ”
The buyers could have waited and hoped that the builder did not finish by the deadline, at which point they could have rescinded the contract, demanded their money back with interest, and recovered any actual damages that they had suffered. As for the force majeure clause in the contract, it covered unlikely events, such as acts of God and labor strikes. It did not render “illusory” the builder’s contractual duty to complete the condominium within two years.