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Busciglio v. DellaFave

366 N.J. Super. 135, 840 A.2d 897 (App. Div. 2004)

CONTRACTS; ATTORNEYS; AGENCY—Attorneys at law are not automatically presumed to be attorneys in fact for the purpose of binding their real estate clients to a contract.

A real estate broker prepared a contract for the sale of residential property. It contained a standard attorney-review clause allowing each party to have its attorney review the contract within a three business day period. If the attorney disapproved, he or she was required to notify the real estate broker as well as the other party within the three business days. If no disapproval was received within those three days, then the contract became legally binding as written.

Two days after the contract was signed, the buyer’s attorney wrote to the seller’s attorney expressly disapproving the contract and simultaneously offering an amendment to the contract in the form of a contract rider. The cover letter said that the signature of the seller’s attorney in place of the actual seller was acceptable “to expedite conclusion of the attorney review.” The buyer’s attorney then added that he was instructing his client to forward payment to the seller’s attorney to be deposited in his trust account, but that it should not be deposited until the amendment was signed by both the seller’s attorney and the seller.

A day later, the seller’s attorney responded that he had not seen the completed contract of sale, but he still proposed changes to both the contract of sale and the rider and faxed them to the buyer’s attorney, who signed the changes as “approved,” and faxed them back. The next day, the seller’s attorney sent a letter to the buyer’s attorney acknowledging that he had received the completed agreement of sale, which, at that time, was signed by the seller. He also returned the rider, signing it on behalf of his clients and noting that it was subject to his previous letter that the buyer’s attorney had already approved. On the very next day, the seller’s attorney wrote to the buyer’s attorney to say that the seller had requested that he “not revive the contract of sale.” The buyer then sued the sellers for specific performance of the amended contract.

Neither attorney had obtained a written retainer agreement setting forth the scope of either attorney’s representation. Furthermore, neither the seller nor the buyer had signed any of the changes to the contract of sale or executed a power of attorney appointing their respective lawyers as attorney-in-fact.

The Court held the essential terms of a contract could be satisfied from the letters written between the attorneys, but there was a question as to whether the seller’s attorney had the authority to bind the seller to the contract. If the seller expressly authorized its attorney to sign on its behalf, specific performance could be ordered. Here, the lower court did not address the issue of express authority. When it ordered specific performance, it focused upon the actions of the seller’s attorney without determining if he could bind his client to the contract. Apparent authority must be established “clearly and convincingly” by the actions of a principal, not those of its alleged agent. Therefore, the Court reversed the lower court and remanded the matter for a trial to determine whether the seller had either expressly or implicitly authorized its attorney to bind it to the amended contract.

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