1. Before You Send a Default or Termination Notice
A failed closing or missed obligation does not automatically give either side the right to walk away. The starting point is the agreement itself: what performance was required, whether the alleged breach triggers a termination right, whether notice or an opportunity to cure is required, and whether any contingency remains open.
Read the Notice and Cure Provisions before Taking a Position
T process is complete can create a separate dispute over whether the terminating party acted consistently with the contract.
The same review should cover amendments, extensions, waivers, and later communications. A deadline in the original agreement may no longer control if the parties validly modified it. Issues that arise before closing may overlap with broader real estate transaction counsel, but once performance breaks down, the notice history becomes central.
Check Whether a Contingency Still Gives a Contractual Exit
Financing, inspection, appraisal, title, and due-diligence contingencies can create contractual rights to cancel, but those rights usually depend on the wording and timing of the agreement. The important question is not simply whether a problem occurred. It is whether the contract still gives the party a right to act because of that problem.
2. Match the Remedy to What You Actually Want
Before making a demand, decide whether the objective is money, unwinding the transaction, or completing it. Damages, rescission, and specific performance serve different purposes, and the facts supporting one remedy may not support another.
Damages and Rescission Are Not Interchangeable
Damages generally seek compensation for loss caused by a breach. Rescission instead seeks to unwind the contract.
Civil Code § 1689 permits rescission on specified grounds, including certain cases involving mistake, duress, fraud, undue influence, failure of consideration, or unlawfulness. Civil Code § 1691 also matters: a party seeking to effect rescission generally must give prompt notice after discovering the facts supporting rescission and restore, or offer to restore, what the party received under the agreement, subject to the statute's qualifications.
A deal becoming financially unattractive is not, by itself, a statutory ground for rescission.
Specific Performance Is More Than a Claim That the Property Is Unique
Civil Code § 3387 presumes that money damages are inadequate for breach of an agreement to transfer real property. For a single-family dwelling that the party seeking performance intends to occupy, that presumption is conclusive, but only on the adequacy of monetary compensation.
It does not create an automatic right to force a sale. The agreement must still be sufficiently definite and enforceable, and the party seeking relief must satisfy the requirements applicable to specific performance. Civil Code § 3386, for example, addresses the claimant's counterperformance.
When a contract dispute reaches that stage, the issues fall more directly within real estate litigation.
3. A Deposit Clause Does Not Automatically Decide Who Keeps the Money
A purchase agreement may label a deposit as liquidated damages, but the label alone does not end the analysis. The property type, buyer's intended use, amount actually paid, and execution of the provision can determine which statutory rules apply.
The 3% Rule Applies to a Defined Category of Residential Property
Civil Code § 1675 defines residential property for this purpose as property primarily consisting of a dwelling with no more than four residential units where, when the contract is made, the buyer intends to occupy the dwelling or one of its units as a residence.
For a qualifying transaction, an amount actually paid under a compliant liquidated damages provision that does not exceed 3% of the purchase price is generally valid unless the buyer establishes that the amount is unreasonable. If the amount actually paid exceeds 3%, the party seeking to uphold the provision must establish its reasonableness.
The 3% rule therefore should not be treated as a universal cap or automatic deposit-forfeiture rule for every property transaction.
The Clause Also Has Formal Requirements
Civil Code § 1677 requires a real-property liquidated damages provision to be separately signed or initialed by each party. Printed contracts must also satisfy specified formatting requirements.
Where more than one buyer payment is intended to constitute liquidated damages, Civil Code § 1678 imposes additional requirements for later payments. Reviewing the amount without reviewing how the clause was executed can miss a threshold enforceability issue.
4. The Statute of Limitations May Not Be Your First Deadline
A statutory filing period tells only part of the story. Contractual notice periods, cure windows, contingency dates, escrow instructions, and dispute-resolution provisions may require attention long before the outside limitations period expires.
Written and Nonwritten Contract Claims Have Different Periods
Code of Civil Procedure § 337 generally provides four years for an action founded on a written instrument. Section 339 generally provides two years for an action on a contract, obligation, or liability not founded on a written instrument.
Rescission claims require additional care. Sections 337 and 339 contain specific accrual rules for rescission, including delayed commencement in cases based on fraud or mistake until the relevant facts are discovered.
Other causes of action arising from the same transaction may follow different rules. A single “real estate dispute deadline” should not be applied across every possible claim.
The Contract May Require Action Much Earlier
Review the agreement for:
- Default and cure periods;
- Contingency deadlines;
- Methods for giving notice;
- Mediation requirements;
- Arbitration provisions;
- Escrow instructions; and
- Contractual attorney-fee provisions.
If the contract requires mediation or arbitration, the dispute may move into alternative dispute resolution before a court reaches the merits.
5. Build the Record before the Parties' Positions Harden
Real estate contract disputes are usually reconstructed from documents created before anyone expected litigation. Preserving that record early makes it easier to determine what the parties agreed to, what changed, what notices were sent, and whether either side performed as required.
Keep the Original Transaction File Intact
Preserve the executed agreement and addenda, amendments, disclosure materials, inspection reports, escrow instructions, title documents, payment records, notices, proof of delivery, emails, and text messages.
Keep original versions where possible rather than rewriting, annotating, or replacing earlier communications. The timing and sequence of those records may matter as much as the language itself.
Do Not Treat Settlement Talks As a Substitute for Deadline Analysis
Parties often continue negotiating after a deal fails. Those discussions may be useful, but they should be tracked separately from statutes of limitations and contractual deadlines.
Do not assume that negotiations alone extend every filing period or preserve every contractual remedy. When a dispute is moving toward formal claims, the relevant deadlines and any tolling arrangement should be analyzed directly. Broader court proceedings and contract claims may also implicate the firm's litigation practice.
6. When Prompt Review Matters Most
Not every disagreement needs immediate litigation, but some developments can change the available options quickly. A disputed termination, approaching cure or closing date, contested escrow deposit, demand for specific performance, or threatened court filing warrants a closer review of the contract and procedural posture.
What a Focused Review Should Answer
The useful questions are practical: Is there an existing default? Has the required notice been given? Does a cure period remain open? Is a contingency still available? What remedy matches the client's objective? Which contractual and statutory deadlines apply?
Answering those questions before the next demand, termination notice, settlement proposal, or filing can clarify what remains available and what action could unnecessarily narrow the choices.
17 Sep, 2026
