California Civil Jury Instructions (CACI)

357. Seller’s Damages for Breach of Contract to Purchase Real Property

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

1. The difference between the amount that was due to [name of plaintiff] under the contract and the fair market value of the property at the time of the breach; [and]

2. [Insert item(s) of claimed consequential damages, e.g., resale expenses].

New September 2003

Directions for Use

Read this instruction in conjunction with CACI No. 350, Introduction to Contract Damages. If there is a dispute regarding the appropriate rate of interest, 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 3307 provides: “The detriment caused by the breach of an agreement to purchase an estate in real property is deemed to be the excess, if any, of the amount which would have been due to the seller under the contract over the value of the property to him or her, consequential damages according to proof, and interest.”
  • “It is generally accepted that the equivalent of value to the seller is fair market value. Fair market value is reckoned ‘in terms of money.’ ” (Abrams v. Motter (1970) 3 Cal.App.3d 828, 840–841 [83 Cal.Rptr. 855], internal citations omitted.)
  • “The “value of the property” to [plaintiff] is to be determined as of the date of the breach of the agreement by [defendant].” (Allen v. Enomoto (1964) 228 Cal.App.2d 798, 803 [39 Cal.Rptr. 815], internal citation omitted.)
  • There can be no damages where the value to the owner equals or exceeds the contract price. (Newhart v. Pierce (1967) 254 Cal.App.2d 783, 792 [62 Cal.Rptr. 553], internal citation omitted.)
  • “[T]he view that this section is exclusive, and precludes other consequential damages occasioned by the breach, was rejected in Royer v. Carter. Under Civil Code, section 3300, other damages are recoverable, usually embracing the out- of-pocket expenses lost by failure of the transaction.” (Wade v. Lake County Title Co. (1970) 6 Cal.App.3d 824, 830 [86 Cal.Rptr. 182], internal citation omitted.)
  • “[C]ourts have permitted consequential damages, only where the seller has diligently attempted resale after the buyer has breached the contract.” (Askari v. R & R Land Co. (1986) 179 Cal.App.3d 1101, 1107 [225 Cal.Rptr. 285], internal citation omitted.)
  • “[I]f the property increases in value before trial and the vendor resells the property at a price higher than the value of the contract, there are no longer any loss of bargain damages.” (Spurgeon v. Drumheller (1985) 174 Cal.App.3d 659, 664 [220 Cal.Rptr. 195].)
  • “The same rule of no loss of bargain damages to the vendor applies where the resale is for the same price as the contract price.” (Spurgeon, supra, 174 Cal.App.3d at p. 664, internal citations omitted.)
  • “For the reason that no loss of bargain damages are available to a seller if there is a resale at the same or a higher price than the contract price, the law imposes on the seller of the property the duty to exercise diligence and to make a resale within the shortest time possible. In discussing the duty to mitigate where the vendee seeks return of a deposit, the Sutter court states the requirement that resales be made with reasonable diligence ‘states a policy applicable to resales of real property. Whether the resale is made one, two or three months later, or whether it be a year or more, it should be made with reasonable diligence to qualify the vendor to an allowance of an off-set against the vendee’s claim for restitution of money paid.’ ” (Spurgeon, supra, 174 Cal.App.3d at p. 665, internal citations omitted.)
  • “Although it is well settled in the foregoing authorities that damages under Civil Code section 3307 for the difference between the contract price and property value may be insufficient to give the vendor the benefit of his bargain and he is entitled also to resale expenses and some costs of continued ownership, he should not be permitted to receive a windfall at the purchaser’s expense.” (Smith v. Mady (1983) 146 Cal.App.3d 129, 133 [194 Cal.Rptr. 42].)
  • “Inasmuch as under Abrams and Sutter the vendor has an obligation to resell promptly in order to obtain consequential damages and the resale price may fix the property value as a basis for Civil Code section 3307 damages, we are impelled to conclude that there is no inherent separateness in the original sale and subsequent resale transactions. The increased resale price should not be disregarded in considering an offset to consequential damages awarded to a vendor against a defaulting purchaser of real property.” (Smith, supra, 146 Cal.App.3d at p. 133.)
  • “The owner of real or personal property may competently testify to its value.” (Newhart, supra, 254 Cal.App.2d at p. 789, internal citations omitted.)

Secondary Sources

1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 901–906

California Real Property Remedies Practice (Cont.Ed.Bar 1980; 1999 supp.), Breach of Seller-Buyer Agreements, §§ 4.37–4.43

California Practice Guide: Real Property Transactions (The Rutter Group 2000), 11-C, § C., Seller’s Remedies Upon Buyer’s Breach—Damages and Specific Performance

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