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Haque v. Chen

A-5000-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

CONTRACTS; CONTINGENCIES — Where a contract is contingent upon the seller correcting certain defined defects in a property, the buyer has the right to terminate the contract and have the contract deposit returned if the seller fails to satisfy that contingency.

A seller sold a house in as-is condition. The contract had a home inspection contingency provision authorizing the buyer to arrange for an inspection of the property at his own cost and expense. Under its terms, the buyer agreed to immediately arrange for the inspection and to notify the seller of any defects discovered. Upon receipt of a report showing physical defects, the seller had the option to remedy the defects at his expense. If he refused, the buyer had the option of voiding the sale. The parties defined a physical defect as one that wasn’t cosmetic, routine maintenance, an upgrade or improvement, or an item that may have reached or exceeded its useful life expectancy.

Six physical defects were reported, but the seller only agreed to remedy two. Accordingly, the buyer served notice of his intent to void the contract and requested a return of his deposit. The seller refused. The buyer sued, and the seller counterclaimed that the buyer had breached the contract by demanding that he cure all defects, even those non-structural in nature. Because the seller ultimately sold the property to a third party for less than the price under the subject contract, the seller claimed his own damages to be equal to the difference in the price plus carrying costs incurred by him between the time when the buyer voided the original contract until the time the home was sold to the third party.

Following a bench trial, at which both the buyer and seller presented testimony, the lower court found in favor of the buyer. In so doing, it determined that the buyer’s expert witnesses were credible; three of the remaining four defects fell within the definition of a “physical defect” as defined by the parties; and seller’s refusal to correct the three remaining physical defects justified the buyer voiding the contract and demanding the return of his deposit. The lower court also awarded the buyer pre-trial interest and attorney fees because he had offered to take a lower judgment during the pendency of the action, and the resulting judgment was more than 120% of that offer amount. The lower court denied a motion from the seller for reconsideration, and the seller appealed.

The Appellate Division affirmed without discussion for substantially the reasons expressed by the lower court, reminding the seller that credibility determinations by lower courts are entitled to particular deference.

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