Date: Feb 12, 2026

Fixed Closing Dates Can Be Material Without “Time Is of the Essence,” and Waived Penalty Defenses Trigger Enforcement of Liquidated Deposits and Fee-Shifting

1. Introduction

Donovan Realty, LLC; DD&A Tilden Realty, LLC; Zerteck, Inc.; Tilden Recreational Vehicles, Inc.; and Derwood L. Littlefield (collectively, “Donovan”) agreed to sell two “Boat N RV” recreational vehicle (RV) dealerships—both the operating businesses (via an Asset Purchase Agreement) and the underlying real estate (via a Real Estate Purchase Agreement)— to Campers Inn Holding Corporation; CI of Hamburg, LLC; and CI of West Coxsackie, LLC (collectively, “Campers Inn”).

The agreements selected New York law and initially set an April 15, 2020 closing date with “time being of the essence.” When Campers Inn could not timely secure financing, the parties executed an Addendum extending the closing to July 31, 2020. Unlike the original contracts, the Addendum did not repeat the “time is of the essence” phrase, but it required Campers Inn to increase the escrow deposit to $750,000.

Campers Inn still did not obtain financing or board approval by July 31. Donovan was ready to close, treated Campers Inn as in default, and demanded release of the escrow deposit as liquidated damages. Donovan sued for the deposit and attorneys’ fees; Campers Inn counterclaimed for specific performance. After a bench trial, the District Court found Campers Inn materially breached but denied Donovan the deposit and attorneys’ fees. Both sides appealed.

The Third Circuit addressed two core issues: (1) whether July 31 was a binding, material closing deadline despite the Addendum’s omission of “time is of the essence,” and (2) whether the contracts’ liquidated-damages and fee-shifting clauses had to be enforced, particularly where Campers Inn waived any “penalty” defense.

2. Summary of the Opinion

Default affirmed: The Court affirmed the finding that Campers Inn materially breached by failing to close by July 31, 2020. The Addendum’s omission of “time is of the essence” did not negate the parties’ clear intent that July 31 was firm and material.
Deposit and fees reversed: The Court reversed the denial of the $750,000 escrow deposit and attorneys’ fees. Because the contracts unambiguously awarded the deposit as liquidated damages upon buyer default and provided prevailing-party attorneys’ fees, and because Campers Inn waived the only relevant challenge (the “penalty” defense), Donovan was entitled to both.
Remand: The case was remanded for calculation of reasonable attorneys’ fees (including appellate fees).

3. Analysis

A. Precedents Cited

1) Closing dates and “time is of the essence” under New York law

The Court relied on New York decisions recognizing that a date certain can function as a material deadline even without a formal “time is of the essence” recital, depending on text, structure, and circumstances.

Grace v. Nappa, 389 N.E.2d 107, 109 (N.Y. 1979): Cited for the baseline proposition that an express declaration can make punctual performance mandatory. The Third Circuit used this as a starting point, then explained New York law does not end there.
Zev v. Merman, 521 N.Y.S.2d 455, 457 (N.Y. App. Div. 1987), aff'd, 533 N.E.2d 669 (N.Y. 1988): Used to show that strict performance can be required without the magic words where the notice/circumstances specify a definite closing date and warn nonperformance will be a default. The Third Circuit analogized that a clear, bargained-for extension date may be treated as similarly firm when the deal structure signals default consequences.
Jannetti v. Whelan, 17 N.Y.S.3d 455, 457 (N.Y. App. Div. 2015): Cited as an example of contractual text making a deadline dispositive (null and void if not closed by the date), reinforcing that New York courts look to whether the parties made the date outcome-determinative.
USA Recycling, Inc. v. Baldwin Endico Realty Assocs., Inc., 139 N.Y.S.3d 529, 530 (N.Y. App. Div. 2021): Cited for the principle that a buyer can be treated as in default for missing the closing date even absent a strict timing clause, where circumstances demonstrate materiality.

2) Liquidated damages, penalties, and waiver

Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015, 1018 (N.Y. 1977): Provided the governing New York standard: liquidated damages are enforceable unless “grossly disproportionate” to probable loss, in which case they are an unenforceable penalty. The Third Circuit treated this as the only meaningful doctrinal pathway by which Campers Inn could have challenged enforcement of the deposit-as-liquidated-damages term.
Ryan v. Orris, 463 N.Y.S.2d 883, 886 (App. Div. 1983): Cited for the corollary that once a liquidated-damages clause is valid, the nonbreaching party need not prove actual damages—the contract sets the remedy. This undermined Campers Inn’s attempt to argue that Donovan’s later resale at a higher price (and continued profitability) made retaining the deposit inappropriate.
United States v. James, 955 F.3d 336, 344-45 (3d Cir. 2020): Applied for the waiver doctrine: a party cannot raise on appeal a defense it expressly relinquished in the trial court. The Court used this to hold Campers Inn to counsel’s trial admission that the “penalty” defense had not been pleaded and “was not a defense.”

3) Contractual fee shifting

Crown IT Servs., Inc. v. Koval- Olsen, 782 N.Y.S.2d 708, 712 (N.Y. App. Div. 2004): Cited for New York’s general rule that courts enforce attorneys’ fee provisions according to their terms. The Third Circuit used it to support a straightforward textual enforcement of the prevailing-party clause once Donovan was deemed the prevailing party on the core dispute.

B. Legal Reasoning

1) Why July 31 remained a material closing deadline

The central interpretive move was to treat “time is of the essence” language as helpful but not exclusive: New York law allows materiality to be shown through contractual architecture and surrounding circumstances. The Court emphasized three contract-based indicators of firm intent:

Text and linkage: The Addendum explicitly tied the real estate transaction to the July 31 closing date, and the parties later aligned the asset transaction to the same deadline. This mirrored the original deal’s “single closing-date” design.
Section 3(F) as a “negative implication”: By providing a limited, specific extension mechanism only to identify and cure title defects, the Addendum implied that other extensions were not contemplated. The Court treated this narrow carve-out as evidence that the parties otherwise meant July 31 to be firm.
Consideration in the form of a much larger escrow deposit: The deposit increased from $250,000 to $750,000. The Court reasoned that tripling the deposit was consistent with Donovan selling an extension to a hard stop, not granting an open-ended “reasonable time” closing.

The Court also credited record evidence of the parties’ conduct: Donovan had executed closing documents and stood ready to perform, while Campers Inn admitted it lacked financing and board approval. That practical posture supported the conclusion that missing July 31 was not a minor delay but a failure of a key performance condition.

Once Campers Inn materially breached, the Court held Donovan was no longer bound by continuing obligations such as any “no-shop” restriction, and was free to pursue alternative sales.

2) Why the escrow deposit had to be awarded as liquidated damages

The contracts provided that if Donovan was “ready, willing and able” and Campers Inn failed to consummate for reasons other than specified conditions, “the Deposit shall be delivered to Seller as liquidated damages,” as the seller’s “sole and exclusive remedy.” The District Court’s denial effectively required Donovan to prove some uncompensated loss. The Third Circuit rejected that approach as inconsistent with New York liquidated-damages doctrine absent a penalty challenge.

Critically, Campers Inn’s main appellate theme—that Donovan ultimately did well financially and thus should not keep the deposit—only matters if the clause is attacked as a penalty. But Campers Inn waived that defense at trial. Under United States v. James, the waiver foreclosed raising it later. Therefore, the Court enforced the parties’ remedial allocation and ordered the deposit to be awarded.

3) Why attorneys’ fees were also recoverable

The Court treated the fee-shifting clause as an independent contractual allocation of enforcement costs: in any litigation “arising out of” the agreement, the “prevailing Party” recovers reasonable attorneys’ fees “in addition to any other relief.” Because Donovan prevailed on the core breach/default issue and on entitlement to the contractual remedy (the deposit), the Court held Donovan was the prevailing party and remanded only for calculation, including fees on appeal.

C. Impact

Deal drafting and extensions: Parties extending a closing should assume that omitting “time is of the essence” will not, by itself, convert a fixed date into a flexible target. Where the extension is supported by meaningful consideration (e.g., a larger deposit) and includes narrowly defined extension mechanisms, courts may treat the new date as materially binding.
Litigation strategy—plead the penalty defense or lose it: The decision underscores that challenging liquidated damages as an unenforceable penalty is not a mere argument about fairness after the fact; it is a specific doctrine that must be timely raised and preserved. Express trial-level disclaimers can be fatal on appeal.
Fee-shifting clauses have real teeth: Once a court identifies a prevailing party under a broad “arising out of” provision, fee-shifting can extend through appeal, increasing the stakes of disputing default and contractual remedies.
Practical effect in M&A/asset + real estate packages: The case highlights how courts may treat multi-agreement transactions (assets and real estate) as commercially integrated, enforcing a synchronized closing date and associated remedies across the package where the documents and conduct show unified intent.

4. Complex Concepts Simplified

“Time is of the essence”: A contract phrase signaling that deadlines are strict: missing the date is typically a material breach. This opinion explains that, under New York law, even without the phrase, a deadline can still be strict if the contract structure and circumstances show the parties intended it to be firm.
Material breach: A serious contract violation that defeats the deal’s essential purpose and excuses the other side from further performance. Here, failure to close by a firm closing date—where the seller was ready and the buyer was not—was treated as material.
Liquidated damages vs. penalty: Liquidated damages are an agreed, upfront estimate of loss payable upon breach; they are generally enforceable. A penalty is an agreed payment that is “grossly disproportionate” to expected loss and is unenforceable under New York law (per Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc.). If the penalty defense is waived, courts will typically enforce the liquidated amount without requiring proof of actual damages.
Waiver (in litigation): Giving up a legal argument by failing to raise it (or by expressly disclaiming it) in the trial court. Under United States v. James, waived defenses generally cannot be revived on appeal.
Prevailing-party attorneys’ fees: A contract clause shifting reasonable legal fees to the loser. New York courts generally enforce such clauses as written (per Crown IT Servs., Inc. v. Koval- Olsen), and this opinion applies that approach.

5. Conclusion

The Third Circuit (applying New York law) drew a clear throughline: contractual deadlines and remedies are enforced according to demonstrated party intent and preserved defenses. First, a fixed closing date in an extension addendum can remain a material condition even without repeating “time is of the essence,” where the agreement’s design, limited extension language, and consideration (a greatly increased deposit) show a firm bargain. Second, where the contract designates an escrow deposit as liquidated damages upon buyer default, the seller need not prove actual damages—unless the buyer properly raises and preserves a “penalty” defense. Third, a prevailing-party fee clause will be enforced per its terms, including appellate fees.