California Supreme Court Overturns Steiner v. Thexton

By March 18, 2010 Blog, Real Estate Law

In Steiner v. Thexton (2008) 163 Cal. App 4th 359, the California Court of Appeal held that a document entitled “Real Estate Purchase Contract” was not in fact an agreement for the purchase and sale of real property.  Instead, the court held it was an option agreement that was not enforceable by the buyer.  Since the “buyer” could terminate the agreement at any time prior to closing, the court felt that the option was not supported by the required consideration.  The seller was thus allowed to terminate the agreement after the buyer had expended time and money
This ruling caused much concern in the California development community, since many California purchase agreements drafted by developers provide for an unrestricted right of the developer to terminate the agreement if he or she determines that development is not feasible.
Today, the California Supreme Court overturned the Court of Appeals, in Steiner v. Thexton, Ca. Sup. Ct., 03-18-2010, 10 C.D.O.S. 3391.  The Supreme Court held that while the agreement in question was indeed an option, it was enforceable by the buyer because the buyer’s actions were sufficient to provide the necessary legal consideration for a binding contract.
We will post an analysis of the new decision shortly.
Thomas B. Jacob, Real Estate Group