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Quick Chek Food Stores v. Patel

A-5394-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; TIME OF THE ESSENCE—Where a contract does not contain an express time of the essence provision, a court may admit parol evidence to determine if the parties intended to confer a right of strict enforcement of the scheduled performance date.

A corporate food store chain and a property owner entered into a contract for the purchase of land for the construction of a parking lot to service the adjacent convenience store. The contract stated that the food store chain could recover its deposit if closing failed to occur “other than solely by reason of [its] willful breach.” However, the contract also stated that if closing failed to occur due to the food store chain’s default, the owner would retain the deposit as liquidated damages in lieu of any other remedy. The sale was further conditioned on the chain’s securing site-plan approval. If approvals were not obtained by the closing date, the chain had the choice of waiving the condition, delaying the closing for ninety days, or terminating the contract.

After about six months, the chain told the property owner that it could not complete its site plan application because of the discovery of an easement across the property. Several additional delays resulted from that discovery and several extensions were given. During this time, the owner told the chain that the closing delay was making him risk losing the opportunity to buy other properties with the sale proceeds. Eventually, the owner drafted a final extension letter which stating that chain’s failure to close on the agreed-upon date would result in forfeiture of the deposit, and that the owner would be free to sell the property to someone else. A month after the owner’s deadline had passed, the owner terminated the contract and declared the deposit forfeited. The chain then brought suit.

The lower court held that the contract was properly terminated. Specifically, it concluded that the final extension clearly indicated that if the chain failed to close by the established date, it would be in breach of the contract and would forfeit the deposit. The lower court placed heavy emphasis on various letters the owner had sent to the chain voicing his concern about his inability to purchase other property until this property had closed. The lower court therefore concluded that time was of the essence.

On appeal, the chain contended that neither the contract nor the extension letter made time of the essence, and that the lower court should not have used parol evidence to read such a requirement into the contract. Alternatively, it argued that even if time were of the essence, the owner waived it by failing to demand performance on the exact date set forth in the final extension letter. The Appellate Division began by pointing out that judges may consider parol evidence to clarify an intention of the parties arguably expressed in a contract, because that would only be using such evidence to interpret contractual language and would not be an attempt to vary or alter the contract’s terms. It also held that parol evidence is admissible even if a contract is unambiguous, but would only be inadmissible if it were related to an intention that was not even arguably expressed in the contract. Additionally, the Court ruled that when a contract does not expressly make time of the essence, a judge must determine whether the parties intended to confer a right to strict enforcement of the scheduled performance date; and parol evidence may be used in this determination. From the record, the Court agreed that the extension letter in this case made time of the essence. It also held that the owner did not waive time of the essence because he did not make any statement or engage in any affirmative conduct thereafter to encourage the chain to expect further extensions.

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