Background
Landon Cole agreed to buy Coty Link’s Chetek, Wisconsin property—a .14-acre lot and building—for $105,000. Cole accepted the property in its existing “as-is” condition, with disclosed structural defects. The agreement required Link to maintain the property until closing and addressed damage occurring before closing. If damage exceeded 5% of the purchase price, Cole could terminate or proceed with the transaction and receive related insurance proceeds and any deductible credit.
Before the scheduled closing, heavy snow caused the building’s roof to collapse. The damage exceeded 5% of the purchase price, the building was deemed a total loss, and Link received permission to raze it. Cole elected to proceed and sought the insurance proceeds, but Link refused to close. The Barron County Circuit Court found the agreement ambiguous and unenforceable, held that impossibility and frustration of purpose excused Link’s performance, and dismissed Cole’s specific-performance action.
The Court’s Holding
The Wisconsin Court of Appeals reversed. The purchase agreement unambiguously covered the circumstance that occurred: property damage before closing exceeding 5% of the purchase price. It gave Cole the choice to terminate or complete the purchase despite the damage, with entitlement to related insurance proceeds and a deductible credit. The “as-is” and maintenance provisions did not limit the property-damage provision or make the agreement ambiguous.
Impossibility and frustration of purpose did not excuse Link’s performance because the parties had contemplated and allocated the risk of pre-closing property damage in their contract. Link’s refusal to close was therefore a default. The court directed the circuit court to enforce conveyance of the property to Cole and to determine, using the evidence and equitable considerations identified by the appellate court, the extent of Cole’s entitlement to insurance proceeds.
Key Takeaways
- A contract provision expressly addressing pre-closing property damage controls even when the damage is severe.
- Impossibility and frustration defenses do not apply to a risk the parties contemplated and allocated by contract.
- Specific performance may require conveyance of damaged real property while leaving the precise insurance-proceeds remedy for equitable determination on remand.
Why It Matters
The decision underscores the importance of casualty provisions in real-estate purchase agreements. Where the agreement gives the buyer an election to proceed after damage, a seller cannot avoid closing simply because the damage changes the economics of the transaction.
It also confirms that a court may tailor the insurance-proceeds component of specific performance equitably, while still enforcing the parties’ agreed allocation of the risk of loss.