## Facts

- Maxton Builders, Inc. contracted to sell a newly constructed house to Richard and Cynthia Lo Galbo for $210,000.
- The Lo Galbos paid a 10% down payment ($21,000) by check to be held in escrow.
- A rider gave the buyers the right to cancel if real estate taxes on a full assessment for a $210,000 house exceeded $3,500, provided the buyers gave “written notice to the seller within three days,” with escrow funds to be returned upon cancellation.
- The buyers learned within the three-day window that estimated taxes would exceed $3,500.
- The buyers’ attorney telephoned the seller’s attorney within the three days stating the buyers were canceling and mailed a certified letter confirming cancellation within the three days.
- The letter was received after the three-day period expired.
- The buyers stopped payment on the down-payment check.
- Maxton sued for breach and sought the full down payment under New York’s rule permitting a seller to retain a down payment upon the buyer’s willful default.
- Maxton later sold the house at the same price but incurred a $12,000 brokerage commission.
- The Appellate Division granted summary judgment to Maxton for the down payment; the buyers appealed.

## Issues

1. Whether the buyers effectively exercised the contractual cancellation option when they gave oral notice within three days and mailed written notice within three days, but the written notice was received after the three-day period.
2. If cancellation was ineffective and the buyers defaulted, whether the seller’s recovery must be limited to actual damages rather than retention of the full 10% down payment.

## Decision

- The Court of Appeals affirmed summary judgment for Maxton.
- The buyers did not effectively cancel because the contract required written notice within three days and the writing was not received within that time.
- The court reaffirmed that, absent lawful excuse, a defaulting purchaser may not recover the down payment; the seller may retain a customary 10% deposit even if actual damages appear lower.

## Legal Principles

- When a real estate contract conditions a cancellation option on written notice within a specified time, the condition is enforced as written; oral notice does not satisfy a written-notice requirement.
- Mailing written notice within the deadline does not satisfy a contract term requiring written notice “within” the period when receipt occurs after expiration, absent contractual language adopting a mailbox rule or evidence of waiver.
- Under New York law, a purchaser who willfully defaults on a real estate contract without lawful excuse forfeits the down payment; the seller is not required to prove actual damages to retain a customary 10% deposit.
- The down payment’s forfeiture is treated as a settled incident of New York real estate practice, providing certainty where damages can be difficult to measure.

## Conclusion

The court held that the buyers failed to meet the contract’s strict written-notice condition for cancellation and reaffirmed that a defaulting buyer in New York forfeits a customary 10% real estate down payment, allowing the seller to retain the deposit without limiting recovery to proven actual damages.


Maxton Builders, Inc. v. Lo Galbo, 68 N.Y.2d 373 (N.Y. 1986)