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Wood v. Hup

A-6328-02T3 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS;TIME OF THE ESSENCE—If a court interprets a contract to imply that a seller can’t declare a time of the essence closing until the satisfaction of certain pre-conditions, then it will award specific performance to the buyer if the seller won’t convey the property after the erroneously set closing date.

A buyer and a seller entered into a contract for the sale of an unimproved lot of land. The subdivision that created the lot was challenged. The contract included, as a condition precedent, that the final subdivision approval be validated. The seller declared “time of the essence” during the pendency of litigation relating to a third-party challenge to the subdivision approval. After the deadline passed, the seller declared the contract void. The lower court held that the seller did not have a right to make time of the essence before the appellate process was exhausted. Therefore, it awarded specific performance to the buyer. The lower court, accepting the testimony of the buyer’s attorney as credible, found that the parties intended that the closing would not take place before it was clear that the subdivision approval was final and that all appeals had been exhausted.

The lower court relied on a letter from the seller’s attorney to the buyer’s attorney setting forth the date he expected the appeal period to expire, and saying that the seller would be able to close shortly afterwards. It noted that expiration of the appeal period would not have been mentioned if it were unrelated to the terms of the contract. Furthermore, the lower court held that there was no explanation for the long time period between when the contract was executed and the date set forth in the time of the essence notice. The seller testified that he was waiting for the buyer’s father to clear up some financial problems; but the lower court disregarded that testimony because there was no proof that this procedure prevented the closing from taking place. It thought the date chosen for the time of the essence closing was the one upon which all appeals would have been exhausted if the third-party challengers did not seek certification, which they did not. The buyer did not know that the challengers did not seek certification until after the twenty-day certification period had expired. The lower court felt that it was never satisfactorily explained at trial why the seller did not wait until the final potential appeal period had expired. However, it was noted that the seller conveyed the property to his daughter only days after the aborted time of the essence closing.

For those reasons the lower court granted the buyer specific performance, and tailored its relief so that its order for specific performance would not be frustrated by the prior transfer to the seller’s daughter because she was a family member who had knowledge of the buyer’s contract and claim. The Appellate Division affirmed the lower court’s grant of specific performance and ordered the seller to convey the property to the buyer.

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