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Vieser v. Leventhal

A-4526-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

CONTRACTS; GOOD FAITH AND FAIR DEALING — When a right to terminate a contract exists and the reason given for the termination is valid on its face, the motive of the terminating party is irrelevant to the question of whether the termination is effective.

A buyer made an offer, along with a deposit, for the purchase of a home. The buyer and seller negotiated informally and the seller made a counteroffer subject to attorney review. The buyer’s attorney wrote to the seller’s attorney and proposed modifications to the contract, including provisions giving the buyer the right to cancel the contract based on an unsatisfactory home inspection, termite inspection, or radon inspection.

The seller’s attorney responded by proposing that the buyer not be permitted to cancel the contract based on the home inspection or termite inspection if the sellers agreed to repair any problem revealed by those inspections. The seller’s attorney marked “agreed” next to the proposed term regarding the right to cancel based on the radon inspection.

Days later, the sellers orally notified the buyers of excessive radon in four areas of the dwelling. The buyers decided, at that point, not to proceed with the transaction and requested return of the deposit. According to the seller’s attorney, however, the buyer stated that she desired to move out of state. Shortly thereafter, the seller began radon remediation efforts. Subsequent testing discovered radon levels that were, at times, below the cancellation threshold level in the contract and, at times, above.

The seller refused to return the deposit, leading the buyer to file suit. The buyer’s complaint also demanded money damages and attorney’s fees in separate counts alleging both breach of contract and breach of the implied covenant of good faith and fair dealing by the seller. The seller counterclaimed, asking for reformation of the contract and for damages and attorney’s fees based upon the buyer’s alleged breach of contract and of the implied covenant of good faith and fair dealing. The lower court held for the buyer on summary judgment.

On appeal, the Appellate Division observed that contract interpretation is proper during summary judgment unless there was an ambiguity . In interpreting the plain language of the contract, the Court found that the buyer had the right to cancel the contract upon receipt of radon readings above the acceptable level. It rejected the seller’s interpretation of the contract that would have nullified the buyer’s right to cancel once the seller unilaterally began remediation efforts.

Further, the Court found that the presence of the radon clause did not make the contract illusory because an illusory contract exists only if performance of an apparent promise is entirely at the option of the promisor. Next, the Court rejected the seller’s argument that the radon clause was agreed-to only as a result of typographical error. The circumstances of the transaction suggested that the acceptance was not a mistake and, further, that there was no evidence that the buyer was either aware of, or benefitted from, the mistake.

Finally, the Court dismissed the seller’s argument that buyer had breached an implied covenant by using the radon clause as an excuse to terminate the contract so that buyer could move out of state. When a right to terminate exists and the reason is valid on its face, the motive of the terminating party is irrelevant to the question of whether the termination is effective.

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