Case Law Summaries

Echo Sierra, Inc. v. Hedlund

• Opinion Date: March 9, 2001
• Real Property Law
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CONTRACTS; TIME OF THE ESSENCE—A seller’s conduct after execution of a contract can effectuate a waiver of a time limit for satisfaction of a contingency or for enforcement of a closing date.

A contract to sell four vacant lots included a contingency provision requiring the buyer to apply for Coastal Area Facility Review Act (CAFRA) approval within sixty days of contract signing, which would have been ten days later than the estimated closing date within the contract. After sixty days, the buyer continued to negotiate with the New Jersey Department of Environmental Protection (DEP) for CAFRA approval. More than seven months later, the seller sought to terminate the contract and, in fact, sent notification declaring time to be of the essence, fixing a date about fifteen days later for the closing. There was no question that the buyer, although making some mistakes along the way, pursued its CAFRA permit. Although it did not provide the seller with complete information about its dealings with the DEP, it provided most of the correspondence and kept the seller advised of its progress. The seller was impatient throughout the entire period, and had tried to schedule at least two closings before it attempted to make time of the essence. The closing did not take place on the date set forth in the notice and the buyer obtained a judgment from the lower court declaring the seller’s attempt to declare time of the essence fully unreasonable and permitting the buyer to continue to seek CAFRA approval. On appeal, the seller contended that the lower court rewrote the contract of sale such that the buyer received a better contract than it had made for itself, thereby making the contract substantially inequitable. The seller further contended that the lower court erred in finding its declaration of time of the essence to be unreasonable. What the lower court did was to find the contract to be clear and unambiguous, but nevertheless held that the parties did not intend to stand by the literal terms of the contract. “It is axiomatic that the court would not make a better contract for the parties then [sic] they have made for themselves. ... Where the contract terms are clear and unambiguous, there is no room for interpretation and the court must effectuate the declared intent of the parties ... thus, extrinsic evidence of intent is inadmissible ‘to give effect to an intent at variance with that language.’” The lower court judge had concluded that “the unambiguous intent expressed in the writing was not the true intent of the parties because it would be nearly impossible to obtain CAFRA approval within sixty days.” The Appellate Division took note that the buyer’s attorney was experienced in real estate contracts and that it was likely that the buyer knew or should have discovered the risk in such a contingency and contracted against it. Nonetheless, the Appellate Division also noted the applicability of the doctrine of equitable estoppel which is where “conduct, either expressed or implied, ... reasonably misleads another to his prejudice so that a repudiation of such conduct would be unjust in the eyes of the law.” Here, the Court accepted the lower court’s conclusion that the seller’s “conduct after execution of the contract[ ] indicated a willingness to wait a reasonable time for CAFRA approval, rather than strictly adhere to the contingency provision or the closing date in the contract[ ].” The general rule in real estate contracts is that time is generally not of the essence, unless specifically declared to be so. Time “may nevertheless be made of the essence by formal demand that the title be closed by a given day, but the time must be reasonable.” The Appellate Division agreed with the lower court that the buyer had waived the original sixty-day contingency period by waiting until seven months after the expiration of the sixty-day period to assert its right to terminate the contract. It also found that the record demonstrated that after the expiration of the sixty-day contingency provision, the buyer relied upon the waiver by continuing to pursue CAFRA approval. Consequently, the Appellate Division recognized that the case turned on the reasonableness of the seller’s declaration that time was of the essence. The lower court found that attempt to be unreasonable under the circumstances. On the other hand, the lower court did not define what would be a reasonable time. As a result, the Court took note that by the time the matter reached its review, over thirty-one months had elapsed since the parties contracted. Therefore, it remanded the matter to a lower court to give the buyer thirty days to either obtain resolution of the CAFRA permit application or tender the full purchase price, plus interest from the date of the lower court’s decision. The lower court was directed that if the buyer failed to comply with those requirements, the lower court was to declare the contract to be null and void.

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