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Corigliano v. Fernicola

A-5598-04T1 (N.J. Super. App. Div. 2006)

CONTRACTS; BROKERS; STATUTE OF FRAUDS—A preliminary agreement is binding only if the parties intended to be bound, and if a broker participated in the preparation of a preliminary agreement that a party contends constitutes a binding agreement, the agreement should have included a three day attorney right of cancellation text.

A retired septuagenarian placed his house up for sale without the aid of a real estate broker. According to testimony offered at trial, the homeowner’s wife was not completely sure she wanted to sell her house. On May 11, 2004, a sophisticated real estate buyer toured the property with his own real estate broker. The buyer and seller husband agreed on a sale price whereupon the buyer tendered a $1,000.00 deposit and the buyer’s real estate agent presented a document prepared by the buyer’s attorney for the sellers’ signatures. All parties agreed that this document was not a typical contract for sale. The buyer later testified at trial that he intended to bind the sellers to the sale through this document. The sellers telephoned an attorney who advised the sellers to sign the document only if language was added indicating that the sale would not be binding unless and until the buyer and sellers entered into a contract for sale. The document was modified to reflect that “a mutual contract of sale be executed… .” During the telephone call, all parties agreed that the sellers’ attorney would prepare a contract for sale and send it to the buyer’s attorney. The buyer told the sellers that the attorneys would work out all of the details of the sale. Despite reluctance on the part of the seller’s wife, both she and her husband signed the document. The buyer later testified at trial that he viewed the signed document to be a binding contract for sale, whereas the sellers believed the document was a receipt or acknowledgment for the $1,000.00 deposit but was otherwise non-binding. Two days after signing the May 11, 2004 document, the sellers’ attorney forwarded a proposed contract for sale to the buyer’s attorney. Without negotiations between the attorneys, the buyer signed the contract. Thereafter, the sellers’ attorney notified the buyer’s attorney that the sellers did not wish to complete the sale and returned the $1,000.00 deposit. The buyer threatened suit if the sellers did not complete the sale. The sale was not completed and the buyer sued for specific performance.

The lower court judge found that during the May 11, 2004 meeting between the buyer, buyer’s broker, and the seller-husband, the buyer gave assurances that all details of the sale would be negotiated between their respective attorneys. Further, according to the lower court, the language added to the document was clear evidence that the May 11, 2004 document would give the sellers time to consult with an attorney. The lower court found that any reasonable person, especially a sophisticated real estate buyer, would conclude that the added language was intended to give the sellers time to consult with an attorney, and to give the sellers’ attorney an opportunity to prepare a complete contract. The lower court further found that the buyer’s statement to the sellers made prior to execution of the May 11, 2004 document that the attorneys would work out the details was further proof of the parties’ intent not to be bound to the sale until a full and formal contract for sale had been signed. There being no evidence of mutual assent, the lower court concluded that the May 11, 2004 document did not constitute a binding contract.

The lower court further found that buyer’s use of a licensed real estate broker, together with the buyer’s careful avoidance of document language referencing an attorney review period, coupled with the buyer’s threatening letter, all “[bespoke] of sharp dealing.” The lower court thus ruled that the buyer was not entitled to the equitable relief of specific performance.

At trial, the buyer argued that the sellers should be bound to the contract of sale that was prepared by their own attorney, even though it was only signed by the buyer. The lower court rejected this position, and further held that the parties did not intend to be bound by any oral agreement; nor was there clear and convincing evidence of any oral agreement sufficient to satisfy the Statute of Frauds. The lower court dismissed the buyer’s suit, and the buyer appealed.

On appeal, the buyer argued that: (1) the May 11, 2004 document was a binding contract for sale; (2) when viewed together, the contract for sale prepared by the sellers’ attorney and the May 11, 2004 document satisfied the Statute of Frauds; (3) the contract for sale prepared by the sellers’ attorney was a binding offer which was accepted prior to its revocation; and (4) the remedy of specific performance was appropriate because insufficient evidence of “sharp dealing” was presented at trial. Finding substantial and credible evidence to support the lower court’s findings of fact and credibility determinations, the Appellate Division declined to disturb those findings. The legal issues were reviewed de novo.

The Appellate Division ruled that a preliminary agreement is binding if the parties intend to be bound. The parties’ intent is a question of fact to be resolved by examining the nature of the negotiations; the substance of the document; and, the objects sought to be achieved. The Court found the May 11, 2004 document to be a preliminary agreement based on the lack of a heading indicating it was a contract; its informal appearance; the lack of terms other than price, deposit amount, and closing date; and the handwritten insertion of additional language requiring the later execution of a formal contract for sale. Therefore, it affirmed the lower court’s factual findings that the parties did not intent to be bound to the May 11, 2004 document, specifically by citing the assurances given by the buyer that the attorneys would work out the details; the fact that the sellers communicated their intent not to be bound to the document; the sellers’ initial reluctance to sign the May 11, 2004 document; the informal nature of the sellers’ telephone consultation with their attorney; and the sellers’ belief, based on their attorney’s advice, that the document would not be binding if the parties inserted the recommended additional language.

While agreeing with the buyer that the Statute of Frauds may be satisfied by a combination of documents, the Court ruled that to satisfy the Statute of Frauds the person to be bound must have signed the documents. It found that the sellers did not sign the contract for sale prepared by their attorney, and affirmed the lower court’s finding that the sellers’ did not intend to be bound to the May 11, 2004 document. Holding that unless the circumstances behind the execution by different parties of several documents to a single transaction shows the parties’ intent to be bound by all documents of the transaction, a signature does not ordinarily authenticate a document not in existence at the time of the signing, the Court ruled that the Statute of Frauds had not been satisfied because the sellers did not intend to be bound to the May 11, 2004 document and never signed the proposed contract for sale prepared by their attorney.

As to the buyer’s contention, raised for the first time on appeal, that his $1,000.00 deposit constituted part performance sufficient to remove the transaction from the purview of the Statute of Frauds, the Court ruled that partial payment alone is insufficient part performance to remove a case from the Statute of Frauds. Further, it refused to ignore the Statute of Frauds if the party seeking enforcement of the agreement can be restored to its former position without suffering a significant hardship. As the $1,000.00 deposit had been returned to the buyer, the Appellate Division declined to further address this issue.


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