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Tender of Performance- Five rules in California Real Estate and Business Contracts, And The Consequences For Failing To Tender

Tender of performance is a critical concept that only arises in the event of a dispute. The general rule is that to claim the other party is in breach of contract, you have to first tender performance.

1. Tender must be made at the proper time and place. If the agreement does not provide a specific time, then at a reasonable time.

2. Tender must be by the proper method. If the agreement requires a deposit in escrow, it must be deposited; if performance is required by certified mail, it must be so.

3. Tender must be made in good faith and with the ability to perform. A statement that you are ready to perform is not enough when a deposit in escrow is required.

4. Tender must be unconditional, identical to what is specified in the contract. Anything else is ineffective.

5. Tender must be for full performance, thus triggering the obligation of the other party to fully perform.

Experienced Sacramento and Yolo Real Estate Attorneys often advise clients as to whether or not a tender is correctly made. What can happen when a party does not pay attention to the tender rules was made clear in the recent decision in In Re Conservatorship of Estate of Buchenau.

The Tormels bought a house at a public auction conducted by the Public Guardian in its capacity as conservator of an estate. There was a two-month escrow period. The escrow instructions provided that the Tormels were to deposit the balance of $228,600 in escrow no later than two working days prior to close of escrow. The Public Guardian was also supposed to deliver all necessary documents to transfer title to the escrow holder. The contract did NOT specify that “time was of the essence.” Neither party made their deposits by the scheduled closing date.

property_for_sale_5.jpgThe Public Guardian eventually deposit the deed in escrow 19 days later. However, Tormel refused to deposit their cash and consummate the deal, demanding that escrow be cancelled and their deposit returned. The court of appeals noted that neither party “tendered performance” by the closing date. But Tormel did not present any evidence that a delay of 19 days following a two month escrow was an unreasonable time for performance under the circumstances. The Court noted that, even if time for performance has expired has expired, a party cannot claim default by the other party as justification to terminate the escrow without performing or tendering performance to the other party. As such, their refusal to complete the sale (after the Guardian deposited the deed) was rightly considered a breach of contract by Tormel.

Surprising is that the contract did not provide that “time is of the essence.” These are magic words that creates hard deadlines, without which, the parties are required to act reasonably. The Buyers here should have presented evidence of why waiting 19 days was unreasonable- did the lock on there loan expire? Did the house burn down? We will never know, because the buyers did not make the argument to the court.