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GA Court of Appeals Enforces Contract Clause, Excluding Liability for Incidental Damages Where Specific Performance Is Ordered


DonRob Invs., L. P. v. 360 Residential, LLC, 870 S.E.2d 874 (Ga. Ct. App. 2022)

This case arose from a failed real estate transaction. DonRob Investments LP and Donald Robinson Investments, Inc. (collectively DonRob) agreed to sell, and 360 Residential LLC, 360 Sugar Hill LLC, and 360 Capital Company LLC, (collectively 360) agreed to purchase 12 acres (Site) of a 37-acre parcel of property in Sugar Hill, GA (the Agreement). The Site was in the middle of the parcel and flanked by two sections over which DonRob was to retain ownership. 360 planned to build apartments on the Site. DonRob planned to develop the other two sections into townhomes and commercial units.

Under the Agreement, 360 was to apply to rezone the Site, to collaborate with DonRob on site and joint development plans, and to design and construct an access road, including the associated drainage and retainage, utilities, access points, and sidewalks. The Agreement contained a sole-and-exclusive remedy provision that, in the event of DonRob’s default, gave 360 the right “to elect between the following options: (a) to declare this Agreement terminated … [and be refunded] all of the Earnest Money, or (b) maintain an action against Seller for specific performance … . In the event … specific performance is not available … Purchaser may seek to recover from Seller out-of-pocket expenses incurred in connection with the negotiation and preparation of this Agreement … which shall be capped at … $250,000[.]” It also contained an attorney-fee provision under which both parties waived their rights “to recover attorney[ ] fees and other costs, if any, that otherwise would be available by statute or as a matter of law.”

Between the Agreement date and the scheduled closing date, the parties’ relationship deteriorated. DonRob representatives did not appear at the closing, contending that 360 had failed to timely provide all necessary documents and that this failure was a breach of the Agreement. Days later, 360 filed suit for specific performance; breach of contract resulting in at least $1 million in damages, including damage to its reputation with investors; and undue enrichment for the rezoning, approximately $1.5 million in Site improvements and other work. DonRob counterclaimed for breach of contract. The parties cross-moved for summary judgment. The trial court adopted in their entirety each of 360’s proposed orders regarding the various motions. DonRob appealed.

DonRob argued that the trial court erred by allowing 360 to recover monetary damages in addition to specific performance. The Court of Appeals of Georgia agreed. The court recognized that Georgia law generally allows parties to recover incidental damages in addition to being awarded specific performance of a contract, citing Gwinnett County v. Old Peachtree Partners, LLC. But it also recognized that parties to a contract may agree to limit the amount of damages due if the contract is breached, and they are bound by that agreement. If the language of an agreement is plain and unambiguous, the court must afford the agreement its literal meaning.

The court concluded that the language of the Agreement was clear that 360 had two options: terminate the Agreement and recover its earnest money, or seek specific performance; only if specific performance was not available could 360 recover damages capped at $250,000. If 360 had wanted the ability to recover both specific performance and monetary damages, and/or the ability to recover damages exceeding $250,000, then it could have bargained for the inclusion of these remedies in the Agreement. Instead, it contracted to limit DonRob’s exposure by agreeing that “[t]he remedies set forth herein are the Purchaser’s sole and exclusive remedies in the event of any claimed default.” The Court of Appeals thus held that the trial court erred by allowing 360’s damages claim to go forward after ordering specific performance under the Agreement. It reversed the trial court’s order as to this issue.



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