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Ash v. Hoberman

A-5969-03T1 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; SPECIFIC PERFORMANCE — A buyer can not unilaterally waive a mortgage contingency provision in a contract for the sale of real estate unless such waiver is expressly provided for in the contract.

A husband and wife entered into a contract to buy a home. The contract contained a mortgage contingency clause which gave the couple until a certain date to obtain two mortgage commitments to finance the sale. If the couple failed to obtain the commitments by the deadline, the contract provided that either party could cancel the contract. The contract also contained an integration clause which provided that the contract could not be amended without a written agreement signed by both parties. Prior to closing, the couple discovered the property was appraised at twenty thousand dollars less than the contract price. The couple requested that the seller reduce the purchase price, but the seller refused. The couple had difficulty obtaining financing because of the difference between the appraised value and the contract price. Prior to the mortgage commitment deadline, the couple telephoned the seller and informed him of their difficulty in obtaining financing. The couple then told the seller that they were going to waive the mortgage contingency provision because they were unable to obtain the mortgage commitments by the deadline. At no time did the seller agree to this waiver. A couple of days later, the seller canceled the contract and returned the couple’s deposit. The couple then sued the seller for specific performance and damages. Both parties moved for summary judgment. The court dismissed the couple’s complaint on the grounds that it had no merit. It ruled that the mortgage contingency clause could not be unilaterally waived by the couple, an oral contract to bilaterally waive the provision had not been formed, and the parties could not modify the contract without a signed written agreement pursuant to the contract’s integration clause. It further held that an oral modification of the contract was barred by the Statute of Frauds. The couple appealed.

The Appellate Division affirmed the lower court’s ruling in part. It held that a buyer cannot unilaterally waive a mortgage contingency clause when it expressly gives the seller the right to cancel the contract if the contingency has not been met. As a result, the Court concluded that the couple’s unilateral waiver of the mortgage contingency provision was ineffective. It further ruled that there was no evidence that the seller intended to be bound by the couple’s waiver. The Court held that oral modification of a land contract is not barred under the Statute of Frauds and it would be permitted upon a showing that both parties intended to be bound by the oral modification. such Here, however, the Court found that there was no such intent in this case and therefore the waiver was ineffective.

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