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Mill Race Village, Ltd. v. Main & Glen Associates, L.L.C.

A-1335-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

CONTRACTS —When a party’s principal continues negotiations beyond the expiration date of a contract such activity may constitute a waiver of the right to consider the contract terminated.

A developer entered into a contract with a property owner for the purchase of a property where residential townhouses were to be built. The purchase price was $2 million and the developer was required to obtain subdivision approval and all necessary municipal approvals. The contract was for six months with a six-month extension upon payment of an additional deposit. The extension period was implemented, but the parties could not agree on a revised price with both seeking to adjust the sale price in their favor. Following the end of the extension period, the parties continued to negotiate the price. After additional negotiations in which the seller offered a price of $2.3 million, the developer sent closing documents based on the contract price of $2 million.

The seller did not respond to the developer’s attempts to schedule a closing and brought an action against the developer for a declaration that the sale agreement was terminated as a result of the developer’s breach. The developer brought a separate action against the seller for breach and unjust enrichment based on the increased property value resulting from having obtained subdivision approvals. The matters were consolidated. The lower court then rejected the developer’s argument that delaying tactics on the part of one of the seller’s principals prevented the closing before the end of the extension period. Instead, it held that the final date of the extension period marked the expiration of the contract. The lower court also awarded attorneys fees to the seller and refused to address the developer’s claims.

On appeal, the Appellate Division held that the lower court incorrectly disregarded the conduct of the seller’s principal in reaching its finding that the contact had expired at the end of the extension period. It added that the principal’s conduct in continuing negotiations after the end of the extension period could have constituted a waiver of the seller’s right to enforce the term of the contract. The Court, however, pointed out that whether a waiver occurred was a matter of the principal’s intent and this required a factual determination. As a result, it reversed the lower court’s summary judgment ruling that the contract had terminated at the end of the extension period. The Court remanded the matter for a determination as to whether the principal’s conduct in continuing negotiations constituted a waiver of the seller’s right to consider the contract terminated and whether there was any bad faith on the part of the seller’s principal.

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