K & K Developers, Inc. v. Columbia Savings Bank

A-1907-98T2 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: November 23, 1999

CONTRACTS; LETTERS OF INTENT—The implied covenant of good faith and fair dealing does not apply in the absence of a contract; once a letter of intent expires, there is no longer any duty to bargain in good faith.

A potential buyer executed a letter of intent to purchase property from a bank. After months of negotiations and the exchange of contract documents, the bank accepted another offer for the same parcel. The disappointed potential buyer sought an order to have the bank sell the property to it. The lower court held that the parties had not reached an agreement on all material issues. It found that even though the bank’s authorized officer may have “believed that all of the material terms to the contract had been fully negotiated and stated that he did not anticipate the need for further negotiations with [the disappointed buyer], it was [the disappointed buyer] that ultimately insisted on further negotiations, claiming that the written document did not reflect what it believed had been negotiated.” “[It] did not return an executed copy of the agreements and insisted on a further meeting ... to clarify the environmental terms of the deal… .” After finding no issue of material fact concerning the lack of a binding contract, the lower court rejected all of the disappointed buyer’s claims. It held that the implied covenant of good faith and fair dealing does not arise in the absence of a contract. It further held that the express obligation to negotiate in good faith contained in the letter of intent expired with that letter agreement and that the disappointed buyer had presented no evidence that the bank solicited any offers during the effective term of the letter of intent. The Appellate Division agreed and further concluded that no reasonable person could find that a binding agreement on all material terms existed.