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Keywords

contractlawsuitbreach of contractdamagesappealliquidated damages
contractbreach of contractdamagesappealliquidated damages

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Osborn v. Dennison, 318 Wis.2d 716, 2009 WI 72, 768 N.W.2d 20

Facts

On March 1, 2005, Douglas and Martha Osborn accepted Harold Dennison's offer to purchase their home. The purchase offer included a buyer-default clause outlining the seller's options if the buyer defaulted. After several failed attempts to close the sale, the Osborns filed suit against Dennison for breach of contract, seeking actual damages. However, they did not direct the return of the earnest money to Dennison before filing the lawsuit, which led to the legal dispute over their right to seek actual damages.

On March 1, 2005, Douglas and Martha Osborn accepted Harold Dennison's offer to purchase their home. The purchase offer included a buyer-default clause outlining the seller's options if the buyer defaulted. After several failed attempts to close the sale, the Osborns filed suit against Dennison for breach of contract, seeking actual damages.

Issue

Does the seller in a failed real estate transaction lose the right to sue the defaulting buyer for actual damages if the seller fails to direct the seller's broker to return the defaulting buyer's earnest money prior to the date the seller sues the defaulting buyer for actual damages?

Does the seller in a failed real estate transaction lose the right to sue the defaulting buyer for actual damages if the seller fails to direct the seller's broker to return the defaulting buyer's earnest money prior to the date the seller sues the defaulting buyer for actual damages?

Rule

The Default provision in the Residential Offer to Purchase form gives the seller two separate options to seek damages after the buyer's default: either request the earnest money as liquidated damages or direct the broker to return the earnest money and sue for actual damages. If a seller seeks actual damages, they must direct the broker to return the earnest money before or at the same time as filing suit.

The Default provision in the Residential Offer to Purchase form gives the seller two separate options to seek damages in the wake of the buyer's default.

Analysis

The court determined that the Osborns' failure to direct the return of the earnest money to Dennison before filing suit for actual damages precluded them from seeking those damages. The court emphasized that the terms of the Residential Offer to Purchase required the seller to choose between liquidated damages and actual damages, and by not returning the earnest money, the Osborns effectively elected to retain it as liquidated damages.

The court determined that the Osborns' failure to direct the return of the earnest money to Dennison before filing suit for actual damages precluded them from seeking those damages.

Conclusion

The Supreme Court affirmed the court of appeals' decision, concluding that the Osborns were limited to seeking the earnest money as liquidated damages due to their failure to direct its return before filing suit for actual damages.

The Supreme Court affirmed the court of appeals' decision, concluding that the Osborns were limited to seeking the earnest money as liquidated damages due to their failure to direct its return before filing suit for actual damages.

Who won?

Dennison prevailed in the case because the court found that the Osborns' failure to return the earnest money before filing suit precluded them from seeking actual damages, thus limiting their remedy to liquidated damages.

Dennison prevailed in the case because the court found that the Osborns' failure to return the earnest money before filing suit precluded them from seeking actual damages.

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