Daily Development for Wednesday, November 23, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

VENDOR/PURCHASER; BUYER’S REMEDIES; SPECIFIC PERFORMANCE:   A court need not enforce a contract in a way that would advance injustice or hardship, so it need not order specific performance for the sale of a home where a resident seller has become seriously ill; nonetheless, the recalcitrant seller is still liable to the buyer for damages. 

Kilarjian v. Vastola, 379 N.J. Super. 277, 877 A.2d 372 (N.J. Super. 2004)

Homeowners entered into a contract for the sale of their property.  The closing date was scheduled for June 15, 2004.  On June 14, the seller's attorney wrote the buyer's attorney stating that the seller could not convey title.  On June 15, the buyers' attorney sent a time of the essence letter, setting a closing date of June 25.  The sellers were still unwilling to close.  The contract did not have a liquidated damages clause or any other guide in the event the seller chose not to close.  The buyers sued for specific performance.  They also sought to be paid damages for financing costs incurred because of the delay.

The sellers argued that they intended to move out of their home, but then the wife's spinal muscular atrophy began to accelerate.  They provided the court with a letter from their doctor, describing the illness, which had neither a cure nor an effective treatment.  The doctor explained that the wife had become profoundly disabled and required help with all daily activities.  The doctor also expressed concern that the proposed move would precipitate respiratory failure and could lead to the wife's death. That is why the sellers claimed that they could not fulfill the contract.  They argued that when they entered into the contract, the wife was able to care for herself and was able to walk with braces, but by the time of the suit, she was confined to her wheelchair or her bed.  The sellers also contended that the buyers were aware of the wife's deteriorating condition when the contract was signed and had ample time to find another home.  Furthermore, they argued that they shou!

 ld not
 be responsible for any increase in mortgage rates since they were in fact lower than the rates the buyers had originally committed to pay.

The Court first held that since the buyers had properly made time of the essence and closing did not take place by the date indicated, they may have been entitled to specific performance.  However, it pointed out that a contract's enforcement must not advance injustice or hardship.  For that reason, the Court refused to evict the sellers because the wife's health had deteriorated so badly while the contract was pending, and they wished nothing more than to remain in her home during the most difficult days of her illness.  Accordingly, the Court found that the sellers would suffer great hardship if the contract was enforced, and specific performance was not the appropriate remedy in this case.  Although the Court denied the buyers' claim for specific performance, it ordered the buyers to submit documentation as to the interest rates on a subsequent mortgage if in fact the buyers went out and bought another property financed at a higher rate so that the Court could award those!


Comment: No surprise here.  Specific performance is normally available in real estate transactions, but it an equitable remedy and will not be granted when the remedy would cause undue hardship.   This appears to have been a relatively clear case.  Some of the hardship could have been avoided by the buyers, as they had knowledge of the circumstances, and the hardship on sellers is serious. 

But the fact that specific performance is not awarded does not mean that damages or similar remedies are avoided.  Further, if the property is truly unique, it is possible that the buyers might have sought a future right of first refusal or option when the wife moves out of the home, for whatever reason, and still have a present right to damages.   Likely this was not a practical remedy for them, but in the appropriate case a court should consider it.

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