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Bunky, Inc. v. Hammel

A-4246-04T2 (N.J. Super. App. Div. 2006) (Unpublished)

CONTRACTS; BROKERS; CONFLICTS OF INTEREST — Where a real estate broker does not reveal his or her marital relationship to the buyer, the seller is free to reject the resulting contract or to proceed with the agreement.

A seller and buyer shook hands on a real estate deal. Thereafter, the real estate agent told the seller that the agent was the buyer’s wife. The letter of intent from the buyer designated only the husband as the buyer. A disclosure letter from the agent told the seller that the agent would also be a buyer along with her husband. In response to the letter of intent and disclosure letter, the seller prepared an addendum making both the husband-buyer and wife-agent jointly and severally responsible for payment of the mortgage note. Thereafter the buyers and seller executed a contract. After both parties exchanged letters making time of the essence, and after each failed to appear at the closing arranged by the other party, the buyers initiated suit for specific performance.

On appeal the buyers claimed that the contract was valid and not void ab initio as had been found by the lower court. The seller claimed the contract was void because the real estate agent failed to disclose she was married to the buyer prior to the time when the buyer and seller shook hands on the deal. The New Jersey Statute of Frauds provides that oral agreements to transfer an interest in real property may be enforceable if proven by clear and convincing evidence. However, an agreement is not enforceable until both the buyer and seller reach an understanding as to all essential terms. The seller’s requirement that both the husband and wife jointly and severally guarantee the mortgage note was an essential term of the contract. Thus, the addendum prepared by the seller in response to the buyers’ letter of intent and disclosure letter constituted a counter-offer and a rejection of the buyers’ offer. Even though the buyer-husband and seller shook hands prior to the time when the buyers and seller reached a meeting of the minds on every essential term, the seller was legally free to reject the buyers’ verbal offer, even if the seller felt morally obligated to consummate the deal. After learning of the marital relationship between the agent and the buyer, the seller was free to reject the buyer-husband’s verbal offer and seek the advice of another real estate agent, or waive his right to reject the offer and proceed with the agreement. The Appellate Division rejected the seller’s claim that the contract was void ab initio because the seller waived its right to reject the buyers’ verbal offer and proceeded with the agreement.

Because more than two and one-half years had passed since the ruling in the lower court voided the contract, and since the property has been transferred by the seller to a third party purchaser, the remedy of specific performance was not available to the buyers. Specific performance is not available in cases where the grant of the remedy would be unduly oppressive. Therefore, the matter was remanded for a determination of the consequential damages due from one party to the other for any breach either party might establish.


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