East Orange Neighborhood Improvement Group v. City Of East Orange

ESX-L-5978-97 (N.J. Super. Law Div. 1997) (Unpublished)
  • Opinion Date: October 8, 1997

CONTRACTS; PUBLIC BIDDING—A municipality has the right to waive a “time of the essence” provision in a publicly bid contract because the power to do so is inherent in the power to create such a condition in the first place.

The City of East Orange sold a vacant lot at public auction. The contract with the bidder scheduled closing to take place within 60 days after the bid was confirmed by the City council, with one 90 day extension permitted. Following the signing of the contract, the City and the buyer discovered that the previous owner had caused a Declaration of Environmental Restrictions (“DER”) to be recorded, restricting the use of the property. The City extended the closing date until the DER was removed, which was not until three years after entering into the contract. The dispute was whether the City had the authority to waive the time of the essence closing clause in the contract.

The Law Division granted summary judgment in favor of the City, holding that it acted in good faith and for the public good when it passed a resolution extending the closing date. The Court cited a state Supreme Court decision holding that the power to alter or modify the time for performance of a contractual condition is inherent in the power to create such conditions in the first place, and that a covenant may be released by the party entitled to enforce it. The Court stated that this fundamental rule of contract law extends to a municipality and may be exercised in response to a change in circumstances.