The Importance of Earnest Money Provisions
August 16, 2012In this legal malpractice action, Jean Pierre – a Dallas commercial real estate investor – brought suit against the lawyer who represented him in a failed real estate transaction. Pierre claimed that the lawyer had failed to advise him of the consequences of his counterparty’s changes to the earnest money provision in the real estate contract at issue. As a result of the revised earnest money provision, Pierre lost $400,000 because the contract did not permit him to retain the earnest money when the purchaser pulled out of the transaction at the last minute.
Though the jury found in Pierre’s favor, the Court of Appeals overturned the trial court’s judgment because it found that Pierre failed to offer legally sufficient evidence of proximate causation. In so doing, the Court of Appeals rejected Pierre’s contention that all that he needed to prove to establish causation was that he would not have signed the contract if he had understood the earnest money provision. The Court, in rejecting Pierre’s claim, concluded that Pierre was required to prove that the counterparty would have agreed to the alternative earnest money provision (that would have refunded the money to Pierre), and that Pierre could not establish such a conclusion.
