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Court Rejects Oral Modification to Written Agreement of Sale

In The Herrick Group & Associates, LLC v. K.J.T., L.P., Civil Action No. 07-CV-00628, U.S. Magistrate Judge Timothy R. Rice held that defendant (seller) did not prove the existence of an oral agreement to modify a written agreement of sale with plaintiff (purchaser).

In this action, during a four-day trial, evidence was presented regarding which party was responsible for a failed real estate transaction involving the sale of Washington Towers, a $6.5 million dollar commercial property in the business district of Reading, Pennsylvania.

Plaintiff alleged that defendant attempted to conceal the loss of the building's commercial tenants and also failed to secure plaintiff's oral agreement to address the loss of rental income plaintiff planned to receive as part of its purchase. Defendant countered that there was an oral modification to the agreement of sale which guaranteed lease payments from two commercial tenants who had prematurely terminated their leasehold prior to closing. Defendant sought the forfeit of plaintiff's $325,000 deposit and liquidated damages.

In entering judgment for plaintiff, the Court set forth the law requiring that an oral contract modifying a prior written contract prohibiting non-written modifications must be proved by clear, precise, and convincing evidence. Brinich v. Jencka, 757 A.2d 388, 399 (Pa.Super. 2000). The Court reasoned that defendant failed to meet this burden and noted that all prior modifications to the agreement of sale were in writing, and it also indicated that correspondence between the parties revealed that the guaranteed lease payments were one of several options which were the subject of negotiations for which the parties never came to a final agreement. Thus plaintiff was entitled to a return of their $325,000 deposit.

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