California Civil Jury Instructions (CACI)

356. Buyer’s Damages for Breach of Contract for Sale of Real Property (Civ. Code, § 3306)

To recover damages for the breach of a contract to sell real property, [name of plaintiff] must prove:

1. The difference between the fair market value of the property on the date of the breach and the contract price;

2. The amount of any payment made by [name of plaintiff] toward the purchase;

3. The amount of any reasonable expenses for examining title and preparing documents for the sale;

4. The amount of any reasonable expenses in preparing to occupy the property; and

5. [Insert item(s) of claimed consequential damages].

New September 2003

Directions for Use

Read this instruction in conjunction with CACI No. 350, Introduction to Contract Damages. If the appropriate rate of interest is in dispute, the jury should be instructed to determine the rate. Otherwise, the judge should calculate the interest and add the appropriate amount of interest to the verdict.

For a definition of “fair market value,” see CACI No. 3501, “Fair Market Value” Explained.

Sources and Authority

  • Civil Code section 3306 provides: “The detriment caused by the breach of an agreement to convey an estate in real property, is deemed to be the price paid, and the expenses properly incurred in examining the title and preparing the necessary papers, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed at the time of the breach, the expenses properly incurred in preparing to enter upon the land, consequential damages according to proof, and interest.”
  • Civil Code section 3289 provides:

    (a) Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation.

    (b) If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach.

    For the purposes of this subdivision, the term contract shall not include a note secured by a deed of trust on real property.

  • “ ‘The rules of damages for a breach of a contract to sell or buy real property are special and unique. To the extent that the measure of compensatory damages available to a buyer or seller of real property for a breach of a contract are different from the general measure of compensatory damages for a breach of contract, the special provisions for damages for a breach of a real property sales contract prevail.’ ” (Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 751 [118 Cal.Rptr.3d 531].)
  • “A simple reading of the statute discloses that by its explicit terms it is adaptable only to a failure to convey, and not to a delay in conveying.” (Christensen v. Slawter (1959) 173 Cal.App.2d 325, 330 [343 P.2d 341].)
  • “This court itself has recently described section 3306 as providing for ‘loss-of- bargain damages’ measured by the difference between the contract price and the fair market value on the date of the breach.” (Reese v. Wong (2001) 93 Cal.App.4th 51, 56 [112 Cal.Rptr.2d 669], internal citation omitted.)
  • “It is settled that when a seller of real property fails or refuses to convey, a buyer who has made advance payments toward the purchase price may recover interest on those payments as damages for breach of contract. This rule is not limited to sales of real property; it applies to sales in general.” (Al-Husry v. Nilsen Farms Mini-Market, Inc. (1994) 25 Cal.App.4th 641, 648 [31 Cal.Rptr.2d 28], internal citations omitted.)
  • Section 3306 does not ordinarily apply to breach of an unexercised option to buy property. (Schmidt v. Beckelman (1960) 187 Cal.App.2d 462, 470–471 [9 Cal.Rptr. 736].)
  • “ ‘Generally, [consequential] damages are those which, in view of all facts known by the parties at the time of the making of the contract, may reasonably be supposed to have been considered as a likely consequence of a breach in the ordinary course of events. This provision would conform the measure of damages in real property conveyance breaches to the general contract measure of damages which is specified in Civil Code 3300: “. . . all the detriment proximately caused (by the breach), or which, in the ordinary course of things, would be likely to result therefrom.” ’ ” (Stevens Group Fund IV v. Sobrato Development Co. (1991) 1 Cal.App.4th 886, 892 [2 Cal.Rptr.2d 460], quoting the Assembly Committee on Judiciary.)
  • “Moreover, in none of the foregoing cases does it appear that the buyer demonstrated the existence of the other requisites for an award of consequential or special damages, i.e., that the seller knew of the buyer’s purpose in purchasing the property and that the anticipated profits were proved with reasonable certainty as to their occurrence and amount.” (Greenwich S.F., LLC, supra, 190 Cal.App.4th at p. 757.)
  • “The plain language of section 3306, adding consequential damages to the general damages and other specified damages recoverable for breach of a contract to convey real property, the legislative history of the 1983 amendment acknowledging that the addition of consequential damages would conform the measure of damages to the general contract measure of damages, and the generally accepted inclusion of lost profits as a component of consequential or special damages in other breach of contract contexts and by other states in the context of breach of contracts to convey real property, taken together, persuade us that lost profits may be awarded as part of consequential damages under section 3306 upon a proper showing.” (Greenwich S.F., LLC, supra, 190 Cal.App.4th at p. 758, internal citations omitted.)
  • “Rents received from the lease of the property in this case are not properly an item of consequential damages. Here, plaintiff introduced evidence as to the fair market value of the property which included these profits. To allow these as consequential damages under these circumstances would have permitted a double recovery for plaintiff.” (Stevens Group Fund IV, supra, 1 Cal.App.4th at p. 892.)
  • “The phrase ‘to enter upon the land’ refers to the taking of possession rather than to things done to put the land to general use.” (Crag Lumber Co. v. Crofoot (1956) 144 Cal.App.2d 755, 779 [301 P.2d 952].)
  • “We think the phrase ‘and interest’ should continue to be read as referring to the generally applicable provisions of [Civil Code] section 3287 regarding prejudgment interest. As amended in 1967, subdivision (a) of section 3287 establishes a right to recover prejudgment interest on damages ‘capable of being made certain by calculation’ and subdivision (b) gives the court general discretionary authority to award prejudgment interest where damages are ‘based upon a cause of action in contract . . . .’ The discretionary authority conferred by subdivision (b) will ordinarily apply to loss-of-bargain damages measured by the contract price/market value differential.” (Rifkin v. Achermann (1996) 43 Cal.App.4th 391, 397 [50 Cal.Rptr.2d 661].)

Secondary Sources

1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 898–900

California Real Property Remedies Practice (Cont.Ed.Bar 1980; 1999 supp.) Breach of Seller-Buyer Agreements, §§ 4.11–4.14

Greenwald & Asimow, California Practice Guide: Real Property Transactions, Ch. 11-D, Buyer’s Remedies Upon Seller’s Breach—Damages And Specific Performance, ¶ 11:184 (The Rutter Group)

50 California Forms of Pleading and Practice, Ch. 569, Vendor and Purchaser, § 569.22 (Matthew Bender)

9 California Legal Forms, Ch. 23, Real Property Sales Agreements, § 23.12 et seq. (Matthew Bender)

1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 7, Seeking or Opposing Damages in Contract Actions, 7.04[7][f]

1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 8, Seeking or Opposing Equitable Remedies in Contract Actions, 8.37, 8.58