Case Law Summaries

The Schultz Organization, New Jersey v. Concurrent Computer

• Opinion Date: October 3, 2000
• Real Property Law
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CONTRACTS; INTERFERENCE—Submission of a back-up offer is entirely lawful if no party uses fraudulent, dishonest or unlawful means when approaching the seller with an offer to buy the property.

A buyer contracted to purchase commercial property pursuant to a contract that included a number of standard commercial contingencies. By agreement of the parties, the closing date and the “due diligence” date were each moved several times, but the closing date had never been made “time of the essence.” If the buyer failed to satisfy or waive its due diligence concerns by the “due diligence date,” either party was entitled to terminate the contract. During the term of the contract, another interested party made a substantially better offer and the seller advised the contract buyer that unless the mortgage contingency was satisfied by a certain date, it would terminate the agreement and pursue “negotiations with other interested parties.” The contract buyer was unable to satisfy the mortgage contingency and the seller terminated the agreement. Several days later, the new buyer began to pursue a deal with the seller but, before any new agreement could be reached, the original buyer obtained its financing and attempted to close on the property. The seller refused and the original buyer filed suit. The seller and the original buyer reached a settlement resulting in a higher price and closing took place immediately thereafter. In a series of legal actions that followed, the original buyer asserted a claim for tortious interference against the disappointed second, prospective buyer, presumably to recover the extra money and legal costs that it incurred in the process of acquiring the property. The lower court imposed no liability on the second buyer even though the second buyer had made a higher offer to buy the property before the original contract had actually expired. It found that once the original contract had been terminated, a second buyer could legitimately enter into negotiations with the seller to buy the property. More importantly, the lower court found that “even if there were tenuously a valid equitable or even legal contract, there is nothing in the practice or procedure followed by [the broker or the second buyer] that in anyway sinks to the level that one must find for there to be malice.” “In New Jersey, a claim for tortious interference with a contract must be based upon facts showing the defendant acted both intentionally and with malice.” For purposes of summary judgment, the lower court assumed that the original “unsolicited offer” was intentional and had, in fact, induced the seller to make the closing date with the original buyer “of the essence.” In that regard, the lower court found that this act was done intentionally, thereby establishing part of the second element of a claim for tortious interference with a contract. That, however, left a question whether the first element, malice, was present. The term “malice,” as used in a claim for tortious interference is not understood in the literal sense requiring ill will, but is instead “defined to mean that the harm was inflicted intentionally and without justification or excuse.” The fact that a party “acted ‘to advance [its] own interest and financial position’ does not establish the necessary malice or wrongful conduct.” Applying those factors, the Appellate Division, reviewing the facts in the light most favorable to the original buyer, concluded that the original buyer failed to allege sufficient facts to permit an inference of malice on the part of the second buyer or the real estate broker. Submission of the back-up offer was entirely lawful and neither party otherwise used fraudulent, dishonest or illegal means when approaching the seller with an offer to buy the property. Further, the facts showed that neither the second buyer nor the broker took further steps until they were notified by the seller that the contract had been terminated. At that point, they were justified in legitimately pursuing the deal in earnest by submitting draft agreements and taking other steps.

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