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Kafil v. Anello

2006 WL 3391335 (N.J. Super. App. Div. 2006) (Unpublished)

CONTRACTS; INTERPRETATION — A clear and unambiguous material term of a settlement agreement will not be altered on legal or equitable grounds in the absence of fraud, accident, surprise or improper practice.

A seller of commercial property in disrepair entered into a contract with buyers for the sale of a one-half interest in the property in its “as is” condition. Closing was delayed and the buyers sued the seller to compel specific performance. The suit was eventually referred to mediation where a settlement was reached. The settlement agreement notably stated that the sellers would have to complete improvements and obtain a Certificate of Occupancy (C.O.) by a date certain or otherwise the deed would be returned by the mediator to the seller and the buyers would have no further rights in or to the property. The deadline date passed without the performance required by the owner and the mediator subsequently returned the deed to the seller. A motion to enforce the settlement agreement was denied by the lower court. It ruled that the language of the agreement was clear and unambiguous and, as such, the buyers had no rights to the deed. A motion for reconsideration was likewise denied.

The contract buyers appealed from both orders enforcing the terms of a settlement between the parties that terminated the buyers’ interest in the property because the buyers were unable to obtain a final certificate of occupancy by a stated date. The Appellate Division was satisfied that the plain language of the settlement agreement provided authority to the mediator to return the deed to the seller upon receipt of evidence that the buyers had not obtained a final C.O. by the stated deadline. It noted that contractual terms must be given their plain and ordinary meaning. The Court rejected the buyers’ arguments that a modification occurred or that because the agreement did not contain a time of the essence clause, the time limit for receipt of a final C.O. should have been extended by the lower court. First, the Court saw no evidence of mutual assent by the parties for any modification, and secondly, the Court would not read into plain language of a settlement term and adjust such a material term in order to meet some requested judicial notion of fairness.

In support of its argument for modification of the settlement agreement, the buyers claimed that literal enforcement of the agreement would result in an inequitable forfeiture of the sums expended by the buyers in improving the property. The Court responded that, under law, if parties choose to contract for a forfeiture, a court of equity should not interfere with that contract term in the absence of fraud, accident, surprise or improper practice. The Court found no such specific grounds to permit its interference with the implementation of the contract. In sum, the Court found no legal or equitable grounds to interfere with the unambiguous language of the settlement agreement requiring the mediator to return the deed to the seller upon the buyers’ specific noncompliance.

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