Case Law Summaries

Gross v. Lasko

• Opinion Date: March 30, 2001
• Real Property Law
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CONTRACTS; NOTICE—Where a mortgage contingency clause has no specific provision requiring notice to the seller of its buyer’s election to waive the contingency, any reasonable notice, written or oral, will be sufficient.

A couple was searching for a vacation home and used the services of a licensed real estate agent. A property listed with another agent was located and the couple contracted to buy the property. The deposit was given and a closing was scheduled. The contract contained a mortgage financing contingency. Before the expiration of the contingency period, the listing broker advised the selling broker that the seller no longer wanted to sell the property. This message was conveyed to the buyers, but they had no interest in canceling the contract. In fact, they told the listing broker that they would proceed to closing without mortgage financing. This message was conveyed to the seller. Importantly, at no time did the listing broker suggest that the seller was awaiting written notice of the buyers’ election to proceed without mortgage financing. About ten days later, the seller’s attorney informed the buyers that the seller was canceling the contract because the buyers had failed to provide the seller with written notice that they were waiving the mortgage financing contingency. This left a central issue as to whether written notice was necessary to waive the mortgage contingency clause. The buyers argued that if such written notice was required, the contract should have so stated. The seller denied receiving oral notice of the waiver, and insisted that, under the contract, all notices were required to be in writing and delivered personally or mailed by certified mail, return receipt requested. The lower court held that the buyers had informed the listing broker, who was the buyer’s agent, that they intended to proceed without mortgage financing and that the seller knew of that intention before the mortgage contingency period had expired. The lower court also held that the requirement of a written mortgage commitment did not equate to a mandate that the buyers notify the seller in writing of their desire to proceed on an all-cash basis. On appeal, the buyer argued that the lower court erred because “the contract contained a ‘perpetual mortgage contingency clause’ as opposed to a ‘self-terminating mortgage contingency clause.’” The Court rejected this analysis as lacking authority. Further, the Court pointed out that many provisions within the contract refer to “notice” but there was no such language in the mortgage financing contingency. In addition, the seller argued that the statute of frauds requires written notice of the intent to proceed without mortgage financing. The Court rejected this argument, saying that “[n]o new contract requiring an offer and acceptance was created by [buyers’] election to waive the mortgage contingency period.” Here, there was no specific provision requiring the buyers to notify the seller in writing of their decision opting to waive the contingency clause. With that in mind, the Court refused to imply such a requirement. Instead, it opted to apply principles of reasonableness to the situation and concluded that the notice given was reasonable.

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