Holiday Inns of Am., Inc. v. Knight

70 Cal. 2d 327, 74 Cal. Rptr. 722, 450 P.2d 42 (1969)



Cal. Civ. Code § 3275 and its proscriptions against forfeiture apply in any case in which the party seeking relief from default has brought himself within the terms of the section by pleading and proving facts that justify its application. In determining whether a given case falls within Cal. Civ. Code § 3275, however, it is necessary to consider the nature of the contract and the specific clause in question.


Plaintiffs filed an action to have an option contract deemed still effective despite their late payment. The trial court granted summary judgment in favor of defendants. The plaintiffs appealed the case to the Supreme Court of California.


Should the option contract be deemed effective?




The Court allowed the option contract to remain effective despite the plaintiff's delayed payments. Relying on Cal. Civ. Code § 3275, which provided relief from a loss in the nature of a forfeiture upon making full compensation to the other party, the Court held that this was applicable to an option contract where the only relief sought was from the provision making time of the essence in tendering annual payments. Since defendants had not suffered any injury justifying termination of the contract, none of their reasonable expectations had been defeated, and they would receive the benefit of their bargain, namely, the full price of the option, summary judgment was directed to be entered for plaintiffs.

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