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Raftogianis v. Schmuckler

2005 WL 2654296 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; CONTINGENCIES; WAIVER—Although a mortgage contingency clause primarily protects buyers, the deadline for obtaining the mortgage protects sellers and is therefore of the essence of the contract.

A residential purchase agreement contained a mortgage contingency clause that included the following language: “If a written mortgage commitment is not obtained by July 16, 2004, either Buyer or Seller may cancel this agreement and the deposit money will be returned to Buyer.” On July 15, the parties extended the mortgage commitment date to July 30. Nonetheless, the buyer could not obtain a mortgage commitment by that date. By letter dated July 30, “he advised his broker that he was ‘forced to waive the mortgage contingency provision… .’” The broker conveyed this information to the seller. The seller rejected the buyer’s efforts to waive the contingency and canceled the contract. The buyer then filed a specific performance complaint. Following the filing of motions, the lower court dismissed the specific performance complaint citing a 1987 case standing for the principle “that mortgage contingencies, although generally for the protection of the buyer and therefore waivable by the buyer, may also serve the interest of the seller by insuring that the transaction will in fact go forward. If it is for the seller [and where] parties manifest that [intent], there is nothing wrong with providing at a seller may terminate the agreement… . [T]he buyer has simply no right to require the seller to waive rights that the contract had reserved to the seller.” In the appeal that followed, the Appellate Division agreed with the lower court. It thought the mortgage contingency clause to be clear, especially where it said “either Buyer or Seller may cancel this agreement and the deposit money will be returned to the Buyer.” The Court believed that the buyer’s “effort to unilaterally waive the contingency ignore[d] the plain language of the mortgage contingency clause… .” The seller never agreed to waive the clause and “indeed, had a contractual right to insist on it.” Therefore, the buyer could not unilaterally waive the contingency period. When the buyer argued that the contract did not have a time-of-the-essence provision with respect to the mortgage contingency clause, the Court responded citing earlier cases: “[A]lthough a mortgage contingency clause primarily protects buyers, the deadline for obtaining the mortgage protects sellers and therefore is of the essence of the contract.”


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