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Romano v. Chapman

358 N.J. Super. 48, 816 A.2d 1080 (App. Div. 2003)

CONTRACTS; ATTORNEY REVIEW—Once an attorney has approved a residential sales contract under the three-day attorney review provision, the attorney cannot then reject the contract within the three-day period.

A real estate broker prepared a residential real estate contract containing the standard three day attorney review clause. By the second day, the respective attorneys agreed upon the terms of the contract and “approved” the contract. On the third business day, a new buyer came along and the seller, still within the three day review period, hand delivered a letter to the buyer’s attorney from his own attorney stating that his own attorney “hereby disapprove[d] the Contract of Sale” pursuant to the attorney review clause. The buyer’s attorney rejected that effort and no closing took place. This left the narrow legal issue, based on uncontested facts of “whether the ‘three day review’ period was designed to permit each party to consult with counsel and obtain legal advice [sic] with respect to the contract, therefore confirming a binding agreement once the attorneys for both parties agree to the language of the previously executed agreement, or whether the three day period was designed to permit a ‘timeout period’, or period of reflection ‘to accommodate a rethinking of the entire transaction,’ ..., in which the parties can consider whether they want to go through with the transaction.”

The Appellate Division, after reviewing the history behind the attorney review provision, was “more than satisfied” that it was “designed to give the parties an opportunity for their respective attorneys to review the form agreement, and that once the agreement is approved by the attorney, as the agent for the party, the agreement remains binding upon the client if accepted in that form by the other party.” Consequently, once the attorneys have reviewed the contract and approved it (modified or not), the contract cannot be terminated under its “attorney review” provision. In reaching this conclusion, the Court essentially set aside the fifteen year old decision in Levinson v. Weintraub, 215 N.J. Super. 273, 277 (App. Div. 1987) “which stated that so long as ‘attorney disapproval is registered within three days there can be no contract, regardless of prior approvals.’” Aside from distinguishing the facts of the Levinson case, which included an issue as to whether the attorney-at-law involved in that case was, in fact, acting as an attorney-in-fact, this particular Appellate Division panel pointed to the form agreement’s statement that “this is a binding contract that will become final in three days.” It opined that “[i]t is in the public interest for members of the public to recognize that agreements they sign are binding contracts, and this agreement is no exception unless and until an attorney makes a timely cancellation, or modification which is not acceptable to the other party.” Further, the “attorney review” provision in real estate broker prepared contracts permits cancellation “by the attorney and only the attorney.” In essence, the Appellate Division thought that “[o]nce a party to the agreement obtains [] counsel, and his or her interests are protected by their own attorney who approves the agreement in its final form, the purpose of the ‘three-day review’ provision has satisfied. Although the attorney can be instructed to delay a decision or communication to the last possible moment in case a better offer comes along or the client desires to change his or her mind, the party cannot approve an agreement through the attorney, or send a change which is acceptable to the other party, and then change its mind because a better offer is received within the three days. Stated differently, once the attorney has the opportunity to review the agreement and consult with a client, and the agreement is approved, with or without changes, the client cannot back out of the agreement, even within the three-day period.”

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