Monday, February 15, 2010

Real Estate Law - Cal Appellate Case: Distinguishing damages between a rescission from fraud and one from mutual mistake

February 5, 2010, Sharbianlou v. Karp et al. This was a California appellate case arising out of non-completed sale a commercial property in Burlingame. The property turned out to have once housed a dry cleaner, and to have ground contamination of PERC, the common dry cleaning fluid. The prospective sellers and buyers sued each other. The trial court ordered the would be buyers, among other things, to pay the seller the difference in price between their contract, and the lower amount for which he later sold the property, as well as the difference between what the seller got in rents from a property that he did buy and the higher rents he could have got from a property he could have bought if the deal in Burlingame had just gone through as planned.

The appeals court ruled that these awards were an error. Consequential damages, based on the prevailing party receiving the benefit of his bargain might have been available on a breach of contract, and they might have been available in the event of seller fraud. But the court ruled only out-of-pocket costs, and a return of money paid and property bought, could be recovered from a rescission based on a mutual mistake such as in this case, where neither party knew the extent of the environmental contamination.

Please note. The discussions here no not constitute legal advice.

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