5.5 Default, Remedies, Rescission & Assignment of Florida Real Estate Contracts
Key Takeaways
- The four principal remedies for breach of a real estate contract are specific performance, compensatory damages, liquidated damages, and rescission with restitution.
- Specific performance is available in real estate because every parcel is unique, but F.S. 95.11(6)(a) requires such an action to be brought within 1 year.
- An action on a contract founded on a written instrument must be brought within 5 years under F.S. 95.11(2)(b); an oral contract carries a 4-year period under F.S. 95.11(4)(j).
- Liquidated damages are enforceable only where actual damages were difficult to estimate at contracting and the stated sum is a reasonable forecast rather than a penalty.
- Assignment transfers the assignor's rights but leaves the assignor secondarily liable; only a novation, requiring the consent of all parties, releases the original obligor.
5.5 Default, Remedies, Rescission & Assignment of Florida Real Estate Contracts
Core Principle: Content Area IV, Contracts (11%), lists Real Estate Contracts and Other Contracts as sub-topics after the specific forms. What remains once formation, contingencies, and disclosures are covered is the law of what happens when a contract goes wrong — and the broker is almost always the first person the parties ask.
1. What Constitutes Default
A default is the failure of a party to perform a material obligation when performance is due. Not every failure is a default.
| Situation | Default? | Reasoning |
|---|---|---|
| Buyer fails to deposit the additional earnest money by the contract deadline | Yes | A stated monetary obligation with a stated date |
| Buyer terminates within the inspection period under the contract's terms | No | Exercise of a contractual right, not a breach |
| Buyer's financing falls through after a good-faith application, with timely notice | No, if the financing contingency is satisfied | The contingency allocated that risk |
| Seller refuses to convey after all contingencies are satisfied | Yes | Repudiation of the core promise |
| Seller cannot deliver marketable title and the buyer will not waive | Not a default in the ordinary sense | The title provision governs; usually a right to cure, then termination |
| Either party announces before closing they will not perform | Yes — anticipatory breach | The non-breaching party may act at once |
[!IMPORTANT] A broker must never advise a party that they are or are not in default. That is a legal conclusion, and rendering it is the unauthorized practice of law. The broker's role is to identify the deadline, deliver the notice the contract requires, document the file, and refer the party to counsel.
2. The Four Remedies
| Remedy | What the injured party gets | Typical use |
|---|---|---|
| Specific performance | A court order compelling the breaching party to convey or to purchase | Buyer against a seller who refuses to close |
| Compensatory damages | Money sufficient to place the injured party where performance would have | Either party, where a substitute transaction cost more |
| Liquidated damages | A pre-agreed sum, most often the earnest money deposit | Seller against a defaulting buyer |
| Rescission | Cancellation of the contract and restoration of the parties to their pre-contract positions | Fraud, mutual mistake, or a statutory cancellation right |
Specific Performance
This remedy exists in real estate precisely because of the physical characteristic of non-homogeneity: no two parcels are identical, so money may not enable the buyer to obtain an equivalent property. Note the deadline — F.S. 95.11(6)(a) requires an action for specific performance of a contract to be commenced within 1 year, dramatically shorter than the general contract period.
Liquidated Damages
A liquidated damages clause fixes in advance what the injured party may recover. Florida enforces such a clause only where both of the following were true at the time of contracting:
- Actual damages were not readily ascertainable; and
- The stated sum was a reasonable forecast of probable loss rather than a penalty designed to compel performance.
A clause that would produce a wildly disproportionate recovery — a $200,000 deposit forfeited on a $210,000 sale — invites a court to strike it as an unenforceable penalty and remit the parties to actual damages.
The election structure of the FAR/BAR forms. The standard Florida residential contracts give the seller a choice on buyer default: either retain the deposit as agreed-upon liquidated damages or pursue other remedies. The two are alternatives — the seller cannot keep the deposit and sue for damages on the same breach. On seller default, the buyer may typically elect return of the deposit, which does not by itself waive an action for damages, or seek specific performance. The contracts also commonly require the parties to attempt mediation before litigation.
[!NOTE] Where the deposit sits during all this. Nothing in the parties' dispute changes the broker's escrow duties. A conflicting demand or good-faith doubt triggers written notice to FREC within 15 business days and one of the four settlement procedures within 30 business days under F.A.C. 61J2-10.032(1), unless a statutory exemption applies.
Rescission and Reformation
| Rescission | Reformation | |
|---|---|---|
| Effect | Cancels the contract; parties restored to their prior positions | Rewrites the written document to reflect the parties' actual agreement |
| Grounds | Fraud, material misrepresentation, mutual mistake, duress, undue influence, or a statutory cancellation right | A scrivener's error or mutual mistake in the drafting |
| Money | Deposits and consideration are returned | The contract survives as corrected |
| Example | Seller concealed a known, material, non-observable defect | Legal description transposes a lot number both parties intended |
Florida also supplies several statutory cancellation rights that operate without any breach at all — the condominium windows under F.S. 718.503, and the federal Interstate Land Sales rules for qualifying subdivided-land sales. Those are covered in Sections 2.6 and 11.4.
3. Assignment, Novation & Delegation
Florida real estate contracts are assignable unless the contract says otherwise. The FAR/BAR forms make the point explicit by asking the parties to select whether the buyer may assign and, if so, whether the buyer is released.
| Concept | What moves | Who remains liable |
|---|---|---|
| Assignment | The assignor's rights under the contract move to the assignee | The assignor remains secondarily liable unless expressly released |
| Delegation | Performance of a duty is handed to another | The delegating party remains liable for performance |
| Novation | A new contract substitutes a new party for the original | The original party is fully released — but only with the consent of all parties |
The distinction is examined constantly and decided by one question: was the original party released, and did everyone agree? If not, it is an assignment, and the original buyer is still on the hook.
Assignment in Practice
| Situation | Result |
|---|---|
| Buyer assigns the contract to an LLC they control; contract is silent | Valid assignment; buyer remains secondarily liable |
| Contract states "this contract may not be assigned" | Assignment is a breach |
| Buyer assigns and the seller signs a written release of the buyer | Novation; original buyer released |
| Buyer assumes an existing mortgage without lender release | Assumption; the original borrower remains liable |
| Buyer takes title "subject to" an existing mortgage | Buyer is not personally liable on the note; the original borrower remains liable and the lien stays on the property |
[!IMPORTANT] Assignment of a listing agreement is different. A listing is a personal services contract with the brokerage. It is not freely assignable to another brokerage without the seller's consent, and the listing belongs to the brokerage rather than to the individual associate who took it.
4. Statutes of Limitation
Every remedy above is time-barred eventually. The periods a Florida broker should know come from F.S. 95.11.
| Action | Period | Authority |
|---|---|---|
| Contract, obligation, or liability founded on a written instrument | 5 years | F.S. 95.11(2)(b) |
| Contract not founded on a written instrument (oral), including sale and delivery of goods | 4 years | F.S. 95.11(4)(j) |
| Specific performance of a contract | 1 year | F.S. 95.11(6)(a) |
Two related Florida periods often appear alongside them: adverse possession requires 7 years of possession, and the Marketable Record Title Act in Chapter 712 extinguishes most claims older than 30 years from the root of title.
Why the Broker Cares
The broker's own records duty is keyed to a longer horizon than most of these claims. F.S. 475.5015 requires preservation of all brokerage books, accounts, and records for at least 5 years, and where a record has been the subject of or served as evidence for litigation, for at least 2 years after the conclusion of the civil action or any appellate proceeding, whichever is later — but in no case less than 5 years in total. A file destroyed at year four is destroyed while a written-contract claim is still live and while the broker is the person best able to prove what actually happened.
A buyer under a written Florida purchase contract sues the seller to compel conveyance after the seller refuses to close. Under F.S. 95.11, within what period must an action for specific performance of a contract be commenced?
A buyer assigns a purchase contract to an investment LLC. The contract is silent on assignment and the seller signs nothing releasing the original buyer. What is the legal effect?
A seller and buyer include a liquidated damages clause fixing the seller's recovery on buyer default at the $200,000 earnest money deposit on a $210,000 sale price. If the buyer defaults, how is a Florida court most likely to treat the clause?
Under the standard Florida residential contract structure, a seller faced with a buyer's default may retain the deposit as agreed-upon liquidated damages. What is the consequence of making that election?