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Morton v. 4 Orchard Land Trust

180 N.J. 118, 849 A.2d 164 (2004)

CONTRACTS; STATUTE OF FRAUDS; ATTORNEY REVIEW—Where a contract is unsigned and there is no showing, by clear and convincing evidence, that the parties had a meeting of the minds, the provisions of the three day attorney review clause are inapplicable and any exchanges between the party’s attorneys merely constitute counteroffers.

A buyer authorized his real estate broker to submit an offer for a house. Accordingly, the broker forwarded a broker-prepared real estate contract to the seller. It was signed by the broker and the buyer. Because of competing offers for the property, the buyer increased his bid the next day and submitted the change on the same form contract. The contract stated that it was the sole agreement between the parties “who sign it” and that there were no representations made by the parties other than those set forth in the agreement. It included an attorney review clause which provided that the contract would be binding three days after delivery of the signed contract to the last of the buyer and seller to receive it, unless either party’s attorney disapproved it.

The next day, the seller told the broker that it had accepted the offer and that the buyer’s attorney would receive an attorney review letter that day. Later that day, the seller’s attorney sent a letter to the buyer’s attorney stating that the contract would be acceptable if certain changes were made. The letter also stated that if the seller’s attorney did not receive a response within four days, he would assume that the modifications were acceptable. That day, the broker contracted the seller and requested a copy of the signed contract. Neither the broker nor the buyer ever received a copy.

The following day, the seller’s attorney sent a letter to the buyer’s attorney saying that the seller was terminating the contract. Although a copy of the letter was purportedly sent to the broker, she denied ever receiving it. The buyer argued that the termination letter was ineffective because it did not comply with the contract’s attorney review clause, specifically the part requiring the seller’s attorney’s termination letter to be delivered to the broker by certified mail, telegram, or personal delivery. Although the buyer attempted to immediately accept the seller’s previously proposed modifications, the seller rejected that effort, claiming there was no longer any pending transaction between the parties. The lower court ruled in favor of the seller, and the property was sold to another buyer.

Eventually, the matter reached the New Jersey Supreme Court. The Court held that New Jersey’s Statute of Frauds requires that an agreement to transfer an interest in real estate either be in writing and be signed by the party against whom enforcement is sought or, if oral, be proven by clear and convincing evidence. The Court rejected the buyer’s oral contract theory, concluding that the parties intended to be bound only by a written contract. Under the terms of the broker-prepared agreement, the contract was binding only on “parties who signed it,” and the signed contract had to be delivered to the parties. The broker and the buyer signed the contract; the seller did not.

The buyer argued that the parties agreed to be bound by an oral contract based on the conversation between the seller and the broker about the modifications. The Court held, however, that the letter received by the buyer was a counter offer, not an unqualified acceptance. A few words of general acceptance by a seller followed immediately by a letter from its attorney with a counter-proposal does not constitute a verbal agreement. Even the counteroffer was withdrawn the next day, before the buyer responded.

In essence, the Court held that the method of notification used by the seller’s attorney was not governed by the attorney review clause because the seller never signed the broker-prepared agreement and never manifested an intent to be bound by it. Accordingly, there was never a meeting of the minds and thus there never was a contract.

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