Real estate deals in Tennessee involve significant investments and careful planning. When one side fails to keep a promise, there are legal options that may help address financial losses or, in some cases, encourage the deal to proceed. Understanding these possibilities can help you go through a difficult situation with more confidence.
Understanding a contract breach
A breach occurs when someone fails to meet the terms of a contract. Courts in Tennessee generally consider whether the breach affects the main purpose or value of the deal. If the breach is serious, the party that honored the agreement may pursue legal remedies to address the harm.
Common ways to address a broken deal
1. Monetary compensation
Money damages are the most common solution. Courts aim to put the injured party in the financial position they would have been in if the contract had been fulfilled. Compensation may include:
- Direct losses: Money lost as a direct result of the breach
- Additional costs: Predictable expenses caused by the breach
Courts usually require clear proof that the losses resulted from the broken agreement rather than other factors.
2. Forcing the sale
Tennessee courts sometimes order specific performance, which means the party who broke the contract must complete the sale. Because each property is unique, monetary compensation may not fully address the harm. Courts generally require a well-defined contract and evidence that money alone cannot make things right.
3. Pre-set penalties
Some contracts include liquidated damages clauses, specifying a set amount to pay if someone backs out. Tennessee law typically enforces these clauses if the amount reasonably estimates the harm caused and is not simply a punishment.
4. Canceling the contract
In limited cases, parties may agree to rescind the contract, canceling the agreement entirely. This usually requires returning deposits or other payments. Tennessee courts tend to allow rescission only for major issues such as fraud, undue pressure or a substantial mutual mistake.
5. Attorney fees
Tennessee generally follows a “pay your own way” rule. Each party usually covers their own legal costs unless the contract explicitly states that the losing side must pay attorney fees.
Rules on property condition
Tennessee law also considers whether sellers accurately represent a property’s condition. Remedies vary depending on timing:
- Before closing: A buyer may have the option to cancel the contract and recover any deposits paid.
- After closing: A buyer may no longer be able to return the property but may seek financial compensation for losses tied to the misrepresentation.
In general, the timing of the discovery can play a key role in determining which remedies may be available.
Protecting your interests
When a real estate contract does not go as planned, multiple paths may help resolve the issue. You may pursue monetary damages, request the sale to proceed, or, in some cases, cancel the contract if misrepresentation occurs before closing. The best approach depends on the contract’s terms, the specific circumstances of the situation and the legal real estate solutions with your legal team.