Fixed Closing Dates Can Remain Material Without “Time Is of the Essence,” and Waived Penalty Defenses Require Enforcement of Liquidated-Deposit and Fee-Shifting Clauses

1. Introduction

In Donovan Realty LLC v. Campers Inn Holding Corp (3d Cir. Feb. 9, 2026) (not precedential), the Third Circuit reviewed a post-bench-trial judgment arising out of failed agreements for the purchase of two recreational vehicle (“RV”) dealerships and associated real estate (the “Boat N RV” businesses).

The sellers—Donovan Realty, LLC; DD&A Tilden Realty, LLC; Zerteck, Inc.; Tilden Recreational Vehicles, Inc.; and founder Derwood L. Littlefield (collectively “Donovan”)—agreed to sell operating assets under an Asset Purchase Agreement and properties under a Real Estate Purchase Agreement. The buyers—Campers Inn Holding Corporation; CI of Hamburg, LLC; and CI of West Coxsackie, LLC (collectively “Campers Inn”)—failed to obtain financing and board approval by the extended closing date.

The core issues were (i) whether the addendum’s July 31, 2020 closing date was a material condition despite the addendum’s omission of an express “time is of the essence” clause, and (ii) whether Donovan was entitled to the $750,000 escrow deposit as liquidated damages and to attorneys’ fees under a fee-shifting clause. The contracts contained a New York choice-of-law provision, so New York law governed.

2. Summary of the Opinion

  • Material breach affirmed: The Court affirmed the District Court’s finding that Campers Inn materially breached by failing to close by July 31, 2020, concluding the deadline was material based on the contract’s text, structure, and surrounding circumstances even without restated “time is of the essence” language.
  • Deposits and fees reversed: The Court reversed the denial of escrowed deposits and attorneys’ fees. Because Campers Inn waived any “penalty” defense to the liquidated damages clause, the escrow deposit had to be awarded per the contracts. The fee-shifting clause likewise required an award of reasonable attorneys’ fees, including on appeal, with calculation on remand.
  • Disposition: Affirmed in part, reversed in part, and remanded for fee calculation.

3. Analysis

3.1. Precedents Cited

A. Closing dates and “time is of the essence” under New York law

  • Grace v. Nappa, 389 N.E.2d 107 (N.Y. 1979): Cited for the proposition that an express “time is of the essence” declaration can require performance by a specified date. The Third Circuit used Grace as a baseline rule, then emphasized that New York law can treat a closing date as material even absent that explicit phrase when intent is clear.
  • Zev v. Merman, 521 N.Y.S.2d 455 (N.Y. App. Div. 1987), aff'd, 533 N.E.2d 669 (N.Y. 1988): Quoted for the principle that a party need not “state specifically that time is of the essence” so long as notice specifies a closing time and warns failure will result in default. The Court analogized that, in context, the addendum’s fixed date and deal structure served the same functional role: a clearly material deadline.
  • Jannetti v. Whelan, 17 N.Y.S.3d 455 (N.Y. App. Div. 2015): Used to show that language making the contract “null and void” if closing does not occur by a date can render timing material. The Third Circuit treated the parties’ July 31 deadline—combined with the addendum’s internal mechanisms—as similarly dispositive of materiality.
  • USA Recycling, Inc. v. Baldwin Endico Realty Assocs., Inc., 139 N.Y.S.3d 529 (N.Y. App. Div. 2021): Cited to reinforce that New York courts may treat missing a closing date as default “even in the absence of a strict timing clause,” where the deal context supports that understanding. This case helped the Court reject the buyer’s “reasonable time” theory.

B. Liquidated damages, penalty doctrine, and waiver

  • Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015 (N.Y. 1977): Provided the governing test: liquidated damages are unenforceable only when “grossly disproportionate to the probable loss” (i.e., a penalty). The Court framed this as the “narrow penalty context” in which actual damages matter.
  • Ryan v. Orris, 463 N.Y.S.2d 883 (App. Div. 1983): Cited for the rule that once a liquidated damages clause is valid, the plaintiff need not prove actual damages because the contract fixes the remedy. The Court invoked Ryan to reject Campers Inn’s argument that Donovan’s later higher-price resale and interim profitability should defeat deposit forfeiture.
  • United States v. James, 955 F.3d 336 (3d Cir. 2020): Used for the waiver doctrine: a party cannot raise on appeal a defense it affirmatively relinquished below. This was pivotal because Campers Inn admitted at trial it “never raised penalty as an affirmative defense.” That stipulation foreclosed the only pathway to resisting the liquidated damages clause.

C. Contractual fee-shifting enforced as written

  • Crown IT Servs., Inc. v. Koval-Olsen, 782 N.Y.S.2d 708 (N.Y. App. Div. 2004): Cited for the principle that New York courts enforce fee-shifting clauses according to their terms. The Third Circuit relied on Crown IT Servs. to hold that, having prevailed on the central breach issue and deposit remedy, Donovan was entitled to “reasonable attorneys’ fees,” including those incurred on appeal.

3.2. Legal Reasoning

A. Why July 31 was a material closing deadline without restated “time is of the essence” language

Campers Inn’s primary argument was textual: because the addendum extending the closing date did not repeat the original “time being of the essence” clause, performance was due only within a “reasonable time.” The Court rejected that categorical view and instead applied New York’s intent-and-circumstances approach.

The Court found multiple indicators that the parties treated July 31 as a firm, deal-defining condition:

  • Text and structure: The addendum “explicitly tied” the real estate contract to the July 31, 2020 closing date, and the parties later aligned the asset transaction to the same deadline—signaling a synchronized, single closing moment.
  • Section 3(F) as a negative implication: The addendum contemplated a limited extension only to identify and cure title defects. By expressly providing one narrow extension mechanism, the document implied no broader flexibility for other delays (like financing/board approval).
  • Consideration for extension: Campers Inn tripled the deposit from $250,000 to $750,000. The Court treated that sizeable increase as commercial evidence that the extension was purchased as a firm deadline—i.e., Donovan demanded a high price for a definitive extension, not an open-ended one.
  • Party conduct and contemporaneous communications: Donovan executed closing documents and stood ready to close; Campers Inn admitted it could not. Internal texts (“has to get done by the 31st”) supported the inference that the date was understood as non-negotiable.

The Court also addressed potentially contrary evidence—an earlier draft addendum had time-of-the-essence language that was later struck. It acknowledged the deletion, but held it was “outweighed” by the agreement’s structure and the parties’ behavior demonstrating shared intent that July 31 remained material.

B. Consequences of material breach

Having affirmed material breach, the Court held Donovan was “no longer bound to perform under the contract,” including the “no-shop” provision. This linked the timing holding to practical transactional consequences: once the buyer defaulted on a material condition, Donovan could pursue alternative sales without violating exclusivity restraints.

C. Liquidated damages enforced because the penalty defense was waived

The contracts provided that if the seller was “ready, willing and able” and the buyer failed to close (outside specified conditions), “the Deposit shall be delivered to Seller as liquidated damages,” as the seller’s “sole and exclusive remedy.”

Campers Inn attempted to reframe the clause as unjust because Donovan allegedly had no uncompensated loss (continued profitable operations and later resale at a higher price). The Court treated that as, in substance, a penalty argument—which could have triggered Truck Rent-A-Ctr. scrutiny—but it held the defense was unavailable because Campers Inn expressly conceded it did not plead or pursue “penalty” below. Under United States v. James, that affirmative relinquishment barred appellate resurrection of the issue. With the only relevant defense waived, the deposit provision had to be enforced as written.

D. Attorneys’ fees awarded under the prevailing-party clause

Separately from the liquidated damages clause, the agreement provided: “the prevailing Party shall be entitled to recover its reasonable attorneys’ fees ... in addition to any other relief.” Applying Crown IT Servs., Inc. v. Koval-Olsen, the Court concluded Donovan was the prevailing party on the “central issue”—Campers Inn’s failure to close—and was entitled to recover reasonable fees, including on appeal. The case was remanded for the District Court to calculate the amount.

3.3. Impact

  • Drafting and deal management: The decision signals that, under New York law, removing “time is of the essence” language in an extension addendum will not necessarily convert a hard deadline into a flexible one. Courts may find a date material based on contextual indicators (targeted extension provisions, increased deposit consideration, synchronized closings, and performance-ready conduct).
  • Litigation strategy (liquidated damages): If a buyer intends to challenge a forfeited deposit as an unenforceable penalty, it must timely plead and litigate that defense. Failure to do so can result in strict enforcement of the contractual sum without inquiry into actual damages or later mitigation.
  • Fee-shifting teeth: Where a prevailing-party clause exists, a party that wins the principal breach dispute may recover fees “in addition to any other relief,” including liquidated damages—making the cost of default and litigation potentially far larger than the deposit.
  • Precedential weight: The Court marked the disposition “NOT PRECEDENTIAL,” so it does not bind future Third Circuit panels, but it provides a detailed, persuasive illustration of how federal courts predictably apply New York contract principles in acquisition-and-closing disputes.

4. Complex Concepts Simplified

  • “Time is of the essence”: A contract signal that the stated date is strict—missing it is typically a default, not a minor delay. New York law can treat timing as strict even without the phrase if the contract and circumstances show the date was meant to be firm.
  • Material condition / material breach: A term is “material” when it goes to the heart of the deal. Breaching it excuses the other side from further performance and can trigger contractual remedies.
  • Escrow deposit: Money held by a neutral third party pending closing; the contract dictates who receives it if the deal fails.
  • Liquidated damages vs. penalty: Liquidated damages are an agreed, pre-set remedy for breach, enforceable if they reasonably relate to anticipated harm. A “penalty” is an excessive amount meant to punish, and is unenforceable under New York law.
  • Waiver doctrine: If a party intentionally gives up a defense in the trial court (especially by express concession), it generally cannot revive it on appeal.
  • Fee-shifting (prevailing-party clause): A contract term requiring the losing side to pay the winner’s reasonable attorneys’ fees, which New York courts typically enforce according to the contract’s text.

5. Conclusion

Donovan Realty LLC v. Campers Inn Holding Corp reinforces two practical rules under New York contract law as applied by the Third Circuit: (1) a fixed closing date in an addendum can remain a material performance condition even if “time is of the essence” is not repeated, when the agreement’s structure and the parties’ conduct show a firm deadline; and (2) liquidated-damages deposits and prevailing-party fee provisions will be enforced as written—particularly where the buyer waives the only viable challenge (the penalty defense). The remand underscores that when a contract pairs deposit forfeiture with fee-shifting, default can expose the buyer to both the agreed sum and the full cost of enforcement.