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Cotter v. Newark Housing Authority

2010 WL 1049930 (U.S. Dist. Ct. D. N.J. 2010) (Unpublished)

CONTRACTS — Even if a governing body adopts a resolution approving a sale of its property, if a prospective buyer only has an unsigned draft agreement and correspondence between the prospective buyer and the governmental body evidences that there were negotiations toward a deal, but do not evidence that either party ever signed a contract or that the governmental authority had agreed to its terms, the prospective buyer cannot sustain a breach of contract claim.

A buyer entered into discussions with a municipal housing authority for the purchase and sale of twenty-two acres of property. They exchanged correspondence regarding a due diligence time line, purchase price, and the release of rights of first refusal held by third parties. The buyer sent a letter to the housing authority outlining the agreed upon deal terms. The housing authority replied that, subject to approval by the housing authority’s Board of Commissioners, it would enter into a sales agreement with the buyer. The Board of Commissioners approved the sale and the housing authority sent the buyer a deadline to sign a contract and close the deal. The buyer’s attorney made several changes to the contract to conform with the resolution approving the sale, but the amended contract was never signed by the housing authority.

Some time later, the buyer sent the housing authority a list of items to be resolved in order to clear title, but those items were not resolved. The buyer then sued for breach of contract and specific performance. The housing authority made a motion to have the case dismissed for failure to state a claim for which relief may be granted. The Court granted the housing authority’s motion.

In a breach of contract claim, one must allege the existence of a contract, a breach of the contract, damage resulting from the breach, and that the non-breaching party performed its own obligations. The Court noted that while New Jersey historically required the sale of an interest in real property to be in writing, the parties’ conduct could tend to show they intended to enter into a binding agreement. In that case, a written agreement would not be required. However, if the parties intended to be bound only by a written agreement, then the oral discussions and bargaining positions will not constitute an offer and acceptance.

Here, the Court found that the buyer failed to allege that he had a valid contract with the housing authority. It found that the buyer had an unsigned draft agreement and correspondence that evidenced their negotiations toward a deal but there was no evidence that either party signed the amended contract or the housing authority agreed to its terms. Many proposals were sent back and forth between the parties to reach a deal, but there was no evidence that the parties reached a deal. Therefore, the buyer’s breach of contract claims failed.

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