## Facts

- John L. Ubaldo contracted in writing to buy Roger and Cynthia Williams’s Oxford, Maine home for $450,000, paying a $10,000 deposit with the balance due at a May 1993 closing.
- The agreement made Ubaldo’s duty to purchase contingent on his ability to obtain sufficient financing and required him to seek and accept financing in good faith.
- The contract provided that if Ubaldo breached, the Williamses could retain the $10,000 deposit while reserving other legal and equitable remedies.
- Ubaldo initially could not qualify for a mortgage, and the Williamses agreed to extend the time for performance to allow him more time to secure financing.
- A bank offered financing for $360,000 with Ubaldo’s mother as a co-signer, and the remaining $90,000 was to be supplied by his mother at or before closing.
- At the scheduled closing, the sale did not close because Ubaldo’s mother did not provide the $90,000 cash contribution.
- Afterward, Ubaldo sought other financing without his mother and was denied.
- The Williamses sued for specific performance and release of the deposit from escrow; Ubaldo filed a separate action seeking return of the deposit. The cases were consolidated.
- Before trial, the Williamses sold the property to a third party for $430,000. Although the home had been appraised at $480,000 in preparation for closing, no appraiser testified at trial.
- After a jury-waived trial, the Superior Court found Ubaldo breached and awarded: (1) $20,000 in compensatory damages (contract price minus later sale price), (2) $3,500 for real estate taxes paid between breach and resale, and (3) $500 for snow-removal expenses after the Williamses sold their snow-removal equipment in anticipation of moving. After crediting the $10,000 deposit, the court entered a net judgment of $14,000 for the Williamses.
- Ubaldo appealed, challenging the breach finding and the tax and snow-removal components of damages.

## Issues

1. Whether Ubaldo’s failure to complete the purchase was excused by the financing contingency, or whether he breached by failing to satisfy the contract’s good-faith financing requirement.
2. What measure of damages applies when a buyer breaches a contract to purchase real property, and whether a subsequent resale price may be used as evidence of fair market value at the time of breach.
3. Whether the sellers could recover (a) real estate taxes paid between breach and resale and (b) snow-removal-related expenses as additional damages.

## Decision

- The Maine Supreme Judicial Court (Law Court) affirmed the finding that Ubaldo breached the contract; the financing contingency did not excuse performance on this record.
- The court affirmed the use of the “benefit of the bargain” measure: contract price minus the property’s fair market value at the time of breach.
- The court held that a subsequent arm’s-length resale price is probative evidence of fair market value at the time of breach when there is no showing the resale was unreasonable or made in bad faith; the $20,000 award was therefore supported.
- The court vacated the $3,500 tax award because taxes paid during the period the sellers retained ownership, use, and occupancy were not shown to be part of the benefit-of-the-bargain loss on these facts.
- The court vacated the $500 snow-removal award because it was based on the sellers’ personal plans and there was no evidence Ubaldo knew of those circumstances at contracting.
- The judgment was modified to remove the tax and snow-removal awards and otherwise affirmed, leaving $20,000 in compensatory damages offset by the $10,000 deposit (net $10,000).

## Legal Principles

- A financing contingency that requires the buyer to seek and accept financing in good faith does not automatically excuse nonperformance; the buyer’s conduct and efforts may support a finding of breach.
- In a seller’s action for a buyer’s breach of a real estate purchase contract, expectation (“benefit of the bargain”) damages are generally the difference between the contract price and the property’s fair market value at the time of breach.
- Evidence of a later resale price can be used to prove fair market value at the time of breach when the resale is not shown to be unreasonable or made in bad faith.
- Carrying costs such as real estate taxes incurred while the seller retains ownership and use are not recoverable as benefit-of-the-bargain damages absent a showing that accounts for corresponding benefits of continued ownership.
- Special (consequential) damages may be recovered only when the loss arises from circumstances the parties reasonably had in mind at the time of contracting; losses tied to undisclosed personal plans are not recoverable.

## Conclusion

Williams v. Ubaldo held that the buyer breached a home-purchase contract despite a financing contingency requiring good-faith efforts to obtain financing, and that the sellers’ general contract damages were the contract price minus fair market value at breach, which could be shown by a later good-faith resale price; the court removed added awards for interim real estate taxes and snow-removal expenses because they were not justified as benefit-of-the-bargain or foreseeable special damages on the record.


Williams v. Ubaldo, 670 A.2d 913 (1996)