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Bloodworth v. Reed

HNT-L-360-04 (N.J. Super. Law Div. 2005) (Unpublished)

CONTRACTS—A provision that allows a buyer to terminate the contract if the seller refuses to cure defects in the property is customary in residential real estate contracts and is enforceable absent any evidence of unfair dealing.

A couple entered into a contractual agreement to buy another couple’s house. The buyers made a $45,000 deposit in accordance with the terms of the contract. The contract also provided that the buyers could terminate the agreement if the sellers failed to cure defects found by the buyers during an inspection of the house. The buyers hired inspectors who found several defects. The buyers then sent the sellers a letter requesting repair of eight defects found in or around the house. When the sellers refused five of these eight requests, the buyers terminated the contract and demanded return of their deposit. Shortly thereafter, the buyers entered into a contract to buy a different house. They brought suit against the sellers for return of their deposit. The sellers counterclaimed, seeking specific performance of the contract.

The sellers argued that the buyers acted in bad faith when they entered into a contract to buy the second house. The Court rejected this argument, holding that a buyers’ motive in terminating an agreement is irrelevant where the earlier contract clearly and unambiguously communicates a right to terminate. The sellers also argued that the contract could not be interpreted as granting the buyers an opportunity to terminate the contract should the inspection be unsatisfactory. The Court likewise rejected this argument, holding that such a premise would put an end to virtually every standard contract in the sphere of residential real estate. Finally, the Court held that the contract clearly allowed the buyers to terminate if the sellers failed to cure defects in the property and, absent any evidence of unfair dealing, the terms of that contract were enforceable.

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