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Foss v. Frank Pasquale Limited, Partnership

A-3058-04T3 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; WAIVERS — A risk of loss provision in a sales contract may be limited by the contract’s inspection provision.

A residential real estate contract was the subject matter of an action for specific performance. One provision of the contract allowed the buyer to object to defects in the house, but also to waive its objection if the seller would not make repairs. Another section of the contract, dealing with “Risk of Loss,” allowed either party to cancel the contract if there was damage to the property and the cost to repair the damage exceeded ten percent of the purchase price.

Closing was delayed for five months because the house’s tenant delayed in moving out. Finally, a time of the essence closing was set by the buyer, but the seller refused to appear. Instead, the seller claimed that, “as a result of vandalism and neglect, the property had sustained damages exceeding 10% of the contract price and declared the contract terminated pursuant to the Risk of Loss provision.” The buyer attempted to waive the risk of loss provision, but the seller still refused to close. The lower court was faced with examining the relationship between the inspection clause, which the lower court held permitted the buyer to waive the damage discovered, and the Risk of Loss clause, “which grant[ed] a termination right to either party in the event repair of damages sustained before closing would cost more than 10% of the purchase price to repair.” It felt it necessary to interpret the contract in light of the parties’ intent and , after doing so, it concluded that the Risk of Loss provision was limited by the waiver provision of the inspection clause. Consequently, it ordered that the contract be specifically performed. The Appellate Division agreed for essentially the same reasons.

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