By: Thomas S. Tripodianos Published: January 2007

Contract was rendered nullity when vendors did not respond by prescribed to purchaser's settlement proposal.

Question. I am a builder of a single family home who unsuccessfully negotiated its sale with a prospective purchaser. The sale was never consummated. During the course of various inspections, the parties agreed to numerous extensions of the inspection contingencies until in accordance with the contract, purchasers delivered to my broker a copy of the inspection report listing several substantial defects with notice that purchaser was invoking its option to cancel the contract as well as the option to defer such cancellation for 10 days to permit the parties to reach a written agreement. Thereafter, the parties continued negotiating terms and agreed to several additional extensions of the deferment period. Finally, by letter, purchaser proposed final terms for resolution of the remaining disputes and stated that “[i]f these provisions are not acceptable to your clients, we hereby invoke the contingency contained in Paragraph 14 of the Contract between the parties, deeming the Agreement cancelled, null and void, and hereby request that the deposit made hereunder be returned to the Purchaser.” I did not accept the proposed terms, but proposed by letter, a counteroffer. Purchaser responded by letter, which suggested terms for resolution and once again stated: “If this is acceptable to your clients, please let me know in writing. If not, we shall adhere to the terms of my original letter and the contract shall be regarded as a nullity.” I did not respond to this letter. Thereafter, the parties continued verbal negotiations, culminating with purchaser signing a revised contract and delivering it to me for my signature. I did not further respond to purchaser and did not sign the contract. I ultimately entered into a contract to sell the property to another party. The original purchaser now alleges that the contract is still enforceable and that I breached the contract. Purchaser has also filed a notice of pendency against the property. Did I do anything wrong?

NO. The answer turns upon whether the purchaser had effectively cancelled the contract. Paragraph 14 of the parties' contract provides, in pertinent part:

“This Agreement is contingent upon a written determination· that the property is free from any substantial structural, mechanical, environmental, plumbing, electrical or roofing defects. With respect to all the aforementioned conditions except the roofing, this contingency shall be deemed waived unless [purchaser] shall notify [the real estate broker], in writing, post-marked no later than 14 days from acceptance, or by personal service by such date, of such substantial defect(s), and furthermore supplies a written copy of the inspection report. With respect to the roofing contingency, the period for notification shall be 60 days from inspection. If [purchaser] so notifies, then this Agreement shall be deemed cancelled, null and void, and all deposits made hereunder shall be returned to [purchaser] or, at [purchaser's] option, said cancellation may be deferred for a period of ten (10) days in order to provide the parties any opportunity to otherwise agree in writing.”

To state a cause of action for breach of contract, it was incumbent upon purchaser to state facts which, if credited, allege that an enforceable contract existed between the parties at the time of the alleged breach. It appears that the purchaser concedes that after the builder failed to respond to the deadline imposed by purchaser's letter, the “contract was deemed a nullity.”

Purchaser's assertions that the contract was revived because the parties thereafter orally agreed to withdraw the cancellation and continued negotiating the terms of the contract, or because a signed cancellation and release was never delivered, are unavailing. The clear language of Paragraph 14 and the letters written by purchaser attorney invoking purchaser's unilateral option to cancel the contract unless the parties agreed otherwise in writing within the proscribed time period leave no question that the contract became a nullity by operation of law, freeing the parties to negotiate a new written contract or abandon their efforts. As no new contract was ever executed by both parties, no contract existed on which to premise purchaser's allegations of breach of contract.

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