Sometimes even the best-planned of deals amongst parties may fall through. Parties often turn to the courts to resolve contractual disputes. When a court is interpreting a contract between two parties, it is often as simple as applying the “four corners” rule. I.e. it will not look at anything outside the four corners of the contract. This particular method of interpretation is useful (and under Louisiana law mandatory) where a contract is written clearly and is not ambiguous. In a recent case, the Louisiana Fourth Circuit Court of Appeal upheld this method of interpretation when faced with a contract dispute out of Orleans Parish.
In 1999, Mr. and Mrs. Tubbs made an offer to purchase a house from Mr. and Mrs. Schafer. The Schafers accepted this offer, creating a contract to sell the house. As part of the deal, the Tubbses made a deposit of about $53,000 via a promissory note. Among the terms of this contract was a provision that would cancel the contract should the Tubbses be unable to obtain sufficient financing for the purchase price. If this happened, then the Schafers would have to return the promissory note deposit the Tubbses had paid as part of the arrangement. The Tubbses were unable to get the necessary funding so they did not show up to the closing.
The Schafers sued to collect the note as damages stipulated in the contract. In response, the Tubbses responded that the contract should be considered null and void since they were unable to obtain financing because the financing contract itself required that their home is sold by a specified time. The Tubbses attempted to sell their former home to a family suggested by the Schafers. When the deal fell through due to the bankruptcy of the would-be buyer, they were unable to keep the 7% interest rate they had been promised.