The contract for deed stated that the purchase price was $30,000, to be paid with $3,000 down and 144 monthly payments of $300. The buyers made 90 payments of $300, for a total of $27,000, and demanded a deed.
While the amount financed was stated to be $27,000, the product of 144 monthly payments of $300 would be $43,200. On the seller’s motion for summary judgment, the trial judge held that the buyers were not entitled to the deed, because the contract required payment of 144 installments of $300, not 90 installments.
The Southern District Court of Appeals agreed with the trial judge in Webbe v. Keel, stating:
It is not ambiguous for 144 monthly payments to exceed this contract’s sale price because the time value of money is a judicially-known concept.
Even though the contract did not specifically mention interest on the $27,000, the court apparently saw the buyer’s agreement to pay $16,200 in excess of the $27,000 balance over 12 years to be an agreement to pay interest.
Because the case involved contract interpretation, it could be ruled on by a judge without a trial on a motion for summary judgment, unless the trial judge found that the contract was ambiguous. If the trial judge found the contract to be ambiguous, a trial would be held to obtain evidence outside the text of the contract.
Many agreements to pay money over time that are prepared by amateurs fail to mention the interest rate, how interest is calculated (360-day year or 365-day year, compounding period), early payoff provisions and how payments are to be applied (on day received or on first day of month if received by 5th, for example).
Webbe v. Keel shows how even a very simple contract can pull the parties into court.