Posted in Commercial Real Estate Litigation, Real Estate Law
By Tony Liu, Founder and Principal Business Trial Attorney
In Summary
A seller’s breach of a real estate contract in California does not automatically mean a buyer can stop performing. Your rights depend on what the seller failed to do, whether that obligation affects your own performance, and what remedy the agreement provides. Before missing your own deadline, determine whether the contract gives you a right to cancel, demand a cure, or take another action.
“They Breached First” May Be True. It May Still Not Protect You.
Almost every broken deal eventually produces some version of the same argument:
They didn’t do what they promised, so I stopped.
It feels logical.
If the seller did not perform, why should the buyer have to?
But contract disputes are rarely decided by asking who disappointed whom first. The harder question is what the agreement allowed you to do after the problem occurred.
That distinction recently mattered in Nasey v. Fell Holdings LLC.
A buyer failed to close on two California properties and argued that seller-related disclosure and environmental-testing issues suspended his obligation to close. The California Court of Appeal rejected those theories based on the particular agreement, addenda, and alleged facts.
The case offers an important warning for buyers: being right that the seller failed to do something is not necessarily the same as being excused from your own deadline.
When a transaction is approaching that point, an Orange County real estate litigation lawyer can evaluate the agreement before one disputed obligation turns into two alleged breaches.
Does a Seller’s Breach Excuse a Buyer’s Performance in California?
Sometimes. But not automatically.
California’s Judicial Council instructions for breach of contract recognize an important distinction: a party bringing a contract claim generally must establish that it performed the significant things the contract required or was excused from having to perform them.
That means excuse of performance is real.
But you still need a legal and contractual basis for it.
What is an excuse for nonperformance?
An excuse for nonperformance is a legally recognized reason why a party was not required to complete an otherwise applicable contractual obligation. Whether an excuse exists depends on the agreement, the nature of the obligations, the other party’s conduct, and applicable California law.
This is why “they breached first” is an incomplete analysis.
A seller might miss a deadline to deliver a document while the buyer remains obligated to close.
Another seller’s breach could materially prevent the buyer from completing performance.
Those situations should not be treated identically.
Before you stop performing, you need to understand which situation you are actually in.
What Did the Buyer Argue in Nasey v. Fell Holdings LLC?
Laurence Nasey agreed to repurchase two San Francisco properties for $10.5 million after losing them through foreclosure.
The transaction was repeatedly extended, with the final closing deadline eventually set for September 29, 2022.
Nasey did not close.
He later sought declarations that, among other things, the sellers’ failure to provide certain disclosures and their refusal to permit additional environmental testing affected or suspended his obligation to perform.
The appellate court disagreed.
For the transfer disclosure statement, the court concluded that—even assuming the statutory disclosure was required—the parties had not made its delivery a condition precedent to Nasey’s obligation to close.
The agreement instead established a procedure under which the buyer could review applicable disclosures and either remove the relevant contingency or cancel. The later addenda also significantly changed the parties’ contractual positions.
The court likewise rejected the argument that refusing the later environmental testing constituted a seller breach that suspended closing. The contractual investigation period had long since expired, and the proposed testing involved drilling through concrete, which implicated restrictions contained in the agreement.
The details mattered.
So did the remedy.
What Is a Condition Precedent in a California Contract?
This concept sounds technical, but it answers a very practical question:
Did this have to happen before I had to perform?
California Civil Code § 1436 defines a condition precedent as something that must occur before a contractual right dependent upon it accrues or an act dependent upon it must be performed.
Courts generally do not want to manufacture conditions that the parties did not express.
In Nasey, the Court of Appeal noted the absence of conditional language such as “subject to” or “if” connecting delivery of the transfer disclosure statement to the buyer’s closing obligation. By contrast, the purchase agreement stated that escrow “shall” close by the specified date.
That difference mattered.
If your contract expressly says:
“Buyer’s obligation to close is conditioned upon…”
you may have a much different argument than someone whose agreement separately says:
“Seller shall provide X” and “Buyer shall close by Y date.”
Two contractual duties do not become conditionally linked merely because one happens before the other chronologically.
What Remedy Does Your Contract Give You When the Seller Falls Short?
This may be the most important question in the entire dispute.
Business owners naturally focus on the breach:
What did they fail to do?
A California breach of contract dispute requires another question:
What was I entitled—or required—to do next?
Depending on the agreement and circumstances, your contractual options might include:
- Giving formal notice of the breach.
- Allowing a specified period to cure.
- Withholding a particular performance if authorized.
- Requesting an agreed adjustment.
- Exercising a contingency.
- Cancelling or terminating the agreement.
- Demanding performance.
- Preserving a claim while continuing with the transaction.
The answer is not automatically number eight—or “do nothing until they fix it.”
That distinction drove part of the reasoning in Nasey. The agreement contemplated cancellation in connection with the buyer’s review and approval process. The buyer instead sought to treat the disclosure issue as indefinitely postponing his own performance.
The court would not rewrite the bargain to provide that remedy.
What Is the Difference Between Cancellation and Suspension?
The distinction can determine whether a buyer protects a contractual right or creates a new problem.
Cancellation means:
“I am exercising my right to leave this transaction.”
Suspension means:
“I remain in this transaction, but my obligation does not have to occur yet.”
Those are fundamentally different positions.
Suppose your agreement requires the seller to provide specified due-diligence material. It also says that if you do not approve the information by a particular date, you may cancel.
The seller does not provide something you expected.
You do not cancel.
Instead, you continue pursuing financing for another six months and later argue that your closing deadline never started running.
That position depends on the contract supporting suspension, not merely giving you an unused right to cancel.
This is one reason buyers should not treat remedies as interchangeable.
A right to terminate does not necessarily create a right to remain in the deal indefinitely.
And a right to demand a cure does not necessarily mean your other deadlines disappear while you wait.
Can You Keep the Deal Alive Without Giving Up the Seller’s Breach?
Potentially—but this is where documentation matters.
Sometimes cancellation is technically available but commercially undesirable.
Perhaps the property is uniquely valuable to your business. You have already spent heavily on diligence. Your financing is nearly complete. You still want the transaction.
That does not mean the only choices are cancelling immediately or silently continuing.
Depending on the contract and circumstances, you may need to give notice of the problem, comply with applicable notice-and-cure provisions, seek an amendment, or expressly preserve your position while negotiations continue.
And if the parties extend the transaction, read that amendment carefully.
The language used in real estate contract extensions in California can also affect the dispute, especially if an extension acknowledges that the seller has performed, is not in default, or faces no existing claims.
You do not want to spend weeks documenting an alleged seller breach and then sign an amendment that says the opposite.
Preserving a position requires consistency between what you say, what you do, and what you sign.
What Should You Do When You Believe the Seller Breached First?
Before withholding your own performance, work through the problem in order.
1. Identify the exact obligation.
Do not write simply, “Seller breached the agreement.”
Find the paragraph.
What exactly was the seller required to do?
2. Determine whether the obligation is conditional.
Does the agreement expressly make your performance dependent upon theirs?
Look for language such as “conditioned upon,” “subject to,” or other terms connecting the obligations.
3. Find the contractual remedy.
Does the agreement provide cancellation, notice and cure, an adjustment, damages, or another response?
4. Check the deadline for exercising it.
A contractual remedy can become worthless if you wait beyond the period for invoking it.
5. Review your own outstanding obligations.
Do not become so focused on the seller’s alleged default that you miss your deposit, notice, financing, contingency, or closing deadline.
6. Put your position in writing.
If you intend to preserve a claim while continuing the transaction, silence can create ambiguity you do not need.
7. Review every later amendment.
Make sure the next document you sign does not contradict the position you just preserved.
That process turns an emotional reaction into a contractual strategy.
What If the Seller’s Conduct Actually Prevents You From Performing?
This is an important limit on the lesson from Nasey.
California law does recognize circumstances in which one party’s conduct can excuse the other’s failure to perform. The buyer in Nasey itself argued that the sellers prevented his performance by refusing to allow the Phase II environmental assessment.
The court rejected that argument based on the actual contract and alleged facts—not because prevention can never matter.
Nasey’s investigation rights were contractually time-limited. By the summer of 2022, when he requested the Phase II assessment, that investigation period had long passed. The agreement also restricted destructive testing without seller approval.
There was another problem: financing.
Nasey’s prospective lenders wanted the additional environmental work, but the purchase agreement stated that the transaction was an all-cash offer and not contingent on obtaining a loan.
The court therefore refused to transform his lenders’ later requirements into obligations the sellers had never undertaken.
The practical lesson is narrower and more useful:
If you claim the seller prevented you from performing, identify the contractual right the seller actually prevented you from exercising.
What If You Simply Let Your Own Closing Deadline Pass?
This is where a seller’s potential breach can become a buyer’s litigation problem.
Suppose you believe the seller owes you documents.
You complain.
Nothing changes.
You neither cancel nor formally address how the issue affects closing.
Then your closing date arrives, and you do not perform.
Now both sides may accuse the other of breach.
Your original complaint has not necessarily disappeared. But instead of litigating one clean issue—whether the seller violated the agreement—you may now have to establish why your own nonperformance was excused.
If your transaction is approaching that stage, understanding the consequences of missing a real estate closing deadline becomes critical.
This is also when a delayed transaction can become a broader real estate litigation matter involving deposits, performance, cancellation rights, disclosures, financing, or competing breach claims.
The cleaner strategy is usually to determine your contractual position before the deadline passes.
Why Does This Matter for Orange County Real Estate Deals?
Nasey involved San Francisco properties, but the Court of Appeal was applying California law.
The same contractual questions can arise when an Orange County business owner is buying an industrial building, acquiring an investment property, purchasing mixed-use real estate, or trying to secure the location where the company operates.
If the transaction deteriorates into litigation, venue and procedural questions will depend on the particular dispute and property. Orange County Superior Court maintains a Civil Division for civil matters arising within its jurisdiction.
But the most consequential decision may occur long before anyone files a complaint.
It happens when the seller allegedly defaults, and the buyer decides what to do next.
An Orange County real estate dispute attorney can examine not merely whether the seller did something wrong, but whether the agreement requires notice, permits cancellation, excuses performance, preserves another remedy, or still requires the buyer to meet an approaching deadline.
That second question is often the one that determines the case.
Frequently Asked Questions
Does a seller’s breach automatically cancel a real estate contract in California?
No. A seller’s breach does not automatically mean the contract disappears. The consequences depend on the agreement, the nature of the breach, applicable California law, and any contractual remedy or notice requirements. Buyers should determine what rights the breach creates before assuming they can simply stop performing.
Can I refuse to close if the seller breached the purchase agreement?
Possibly, but whether you can refuse to close depends on the particular breach and contract. An obligation may be conditional, the seller’s conduct may excuse performance, or the agreement may instead provide another remedy. Missing closing without establishing your contractual position can create an additional dispute.
What is a condition precedent in a real estate contract?
A condition precedent is an event or act that must occur before a dependent contractual right or obligation arises. California courts generally look for contractual language showing the parties intended that relationship rather than assuming every seller obligation must occur before a buyer is required to perform.
What happens if the contract gives me a right to cancel and I do not use it?
The effect depends on the agreement and circumstances. However, a contractual right to cancel should not automatically be treated as a right to suspend your own obligations indefinitely. If you want to remain in the transaction while preserving a dispute, the contract and any subsequent amendment should be carefully reviewed.
Can a seller prevent a buyer from performing a real estate contract?
A seller’s conduct can potentially affect or excuse a buyer’s performance in appropriate circumstances. But the buyer must connect the alleged interference to actual contractual rights and obligations. In Nasey, the court rejected the buyer’s prevention theory because the additional testing he sought was outside his contractual investigation period and subject to seller approval.
Being Right About Their Breach Is Only Half the Problem
The instinct behind “they breached first” is understandable.
Sometimes the other side really did fail to perform.
But identifying their failure is the beginning of the analysis—not the end.
The next questions are more important:
What does the contract allow you to do because of it?
What must you do to preserve that remedy?
And what obligations do you still have while the dispute remains unresolved?
The business owner who answers those questions before acting is in a much stronger position than the one who simply stops performing and explains why later.
Protection comes from what the contract says—and what you do next.
If a seller has failed to perform and your own deadline is approaching, Focus Law can help you determine your position before the dispute becomes harder to unwind. Speak with an Orange County real estate litigation lawyer about the agreement, the alleged breach, and the options available before taking the next step.
