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Weston v. Esses

A-4142-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; FRAUD—When contracting parties enter into a contract amendment and into a use and occupancy agreement following the post-contract discovery of an undisclosed underground storage tank, the buyer cannot later terminate the contract on the basis that its seller fraudulently failed to disclose the tank’s presence.

A buyer contracted to purchase a home. The contract stated that there were no abandoned or previously used underground oil tanks. During attorney review, the contract was amended to provide that should a tank be found, the buyer could terminate the agreement. A later inspection revealed the existence of a tank on the property. Despite this, the buyer did not cancel the purchase. Instead, the parties entered into a use and occupancy agreement, amending the contract. It called for the seller to remove the tank, remediate the property, and get a no further action letter from the New Jersey Department of Environmental Protection by a given date.

Allegedly concerned with the speed at which the property was being remediated, the buyer spoke to the seller’s contractor. Based on the information received, the buyer concluded that the seller would not be able to get the no further action letter by the required date. Therefore, six months prior to that date, the buyer declared the contract terminated and vacated the property.

Two months later, the seller produced a no further action letter. Then, the seller set a closing date and served the buyer with a time of the essence notice. The buyer did not appear for the closing. The seller sued, and in response, the buyer asserted fraud and breach of contract by the seller. The seller claimed the buyer breached its representation that there were no tanks on the property. The buyer also claimed that the seller violated its obligation under the use and occupancy agreement to proceed with “due diligence” in obtaining the no further action letter even though the letter was provided well before the deadline.

The seller argued that there was no actionable fraud because the parties had amended the contract during the attorney review period and then entered into the use and occupancy agreement with knowledge of the tank on the property. Lastly, the seller claimed there was no breach because it had remediated the property prior to the deadline.

The lower court granted summary judgment in favor of the seller, and the Appellate Division affirmed. Each held that because the buyer proceeded with the transaction and entered into the use and occupancy agreement with knowledge of the tank, there was no fraud. Furthermore, the seller had complied with the agreement and demonstrated adequate performance within the established deadline.

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