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Taddeo v. Marquis

A-4420-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; TIME OF THE ESSENCE—The course of dealings between parties can indicate an intent to make their contract a “time of the essence” contract.

A buyer and seller entered into a contract for the sale of a house. The house was heated by oil supplied from an underground oil tank. The buyer was aware of the tank before signing the contact. The contract had a January closing date, but the parties agreed to move the closing date up to the prior November to accommodate the seller. The contract stated that the seller was unaware of any “environmental hazards, including the existence of buried oil tanks… .” The buyer inspected the tank, which revealed a leak. The seller had the tank tested and had a valve replaced. The buyer insisted that he would be unable to obtain insurance unless the tank was replaced and demanded that the seller replace the tank. The seller refused. As the closing date approached, the seller’s attorney repeatedly advised the buyer’s attorney that the seller was not responsible for replacing the tank and that if the buyer did not close on the scheduled November date, it would be in breach of the contract.

When the buyer indicated it would not be closing on that date due to the seller’s failure to replace the tank, the seller declared the buyer in breach. The buyer sued for breach of the contract, return of its deposit, and damages. The lower court found in favor of the buyer. It found that the seller breached the contract by failing to disclose the existence of the oil tank and by failing to take corrective measures to get the tank certified so that the buyer could obtain home insurance. It also found that there was no time of essence closing requiring a November closing.

The Appellate Division reversed, holding that the buyer had breached the contract. The court rejected the lower court’s finding that the seller breached by failing to disclose the oil tank. It noted that the buyer knew before signing the contract that there was a tank. The Court interpreted the contract provision to mean that the seller was not aware of the existence of any environmental condition related to the oil tank, not that the seller was not aware of the existence of any oil tank (as the lower court did). The Court rejected the lower court’s finding that the seller had any obligation to obtain certifications relating to the tank so that the buyer could obtain insurance and fulfill the terms of the mortgage commitment. The contract imposed no such obligation on the seller. It also disagreed with the lower court’s finding that time was not of the essence. It found that in order to have a “time of essence” closing, one does not need the magic words “time of essence.” Rather, the course of dealings of the parties can indicate an intent to make the contract a “time of essence” contract. In this case, the correspondence between buyer and seller indicated that the seller intended to make the November closing date time of the essence, since the seller was planning to move to Oklahoma. The Court found that this made it a time of essence contract, and the buyer, by failing to close in November, breached the contract.

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