Indoe v. Dwyer
424 A.2d 456, 176 N.J.Super. 594 (1980)
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Rule of Law:
An attorney approval clause in a real estate contract grants the attorney a right to disapprove the contract for any reason, other than those specifically excluded, as long as the disapproval is exercised in good faith.
Facts:
- In August 1977, Christine and John Dwyer viewed a home for sale by William and Jane Indoe but decided not to make an offer.
- In February 1978, Christine Dwyer learned the Indoe house was still for sale and, after receiving approval from her husband John via telephone, made an oral offer of $225,000.
- A realtor prepared a standard form contract which Christine Dwyer signed, believing it was a preliminary bid and that a formal contract would be prepared later with attorneys.
- The Indoes signed the contract that same evening, finalizing the agreement.
- The contract contained a typed provision stating it was contingent upon approval by the parties' attorneys within three business days, except as to price and financing terms.
- Upon receiving the executed contract, Christine Dwyer was informed that the wall-to-wall carpeting was not included in the sale, contrary to her expectations.
- After consulting with both Christine and John Dwyer, their attorney notified the Indoes' realtor in writing that he was withholding approval of the contract, citing various reasons including the carpeting issue, the proximity of the pool to the house, and the lack of certain testing provisions.
Procedural Posture:
- William and Jane Indoe (plaintiffs) filed a complaint against John and Christine Dwyer (defendants) in the Superior Court of New Jersey, Law Division, Somerset County, for breach of contract.
- The plaintiffs filed a motion for summary judgment, seeking damages.
- The defendants filed a cross-motion for summary judgment, seeking dismissal of the complaint.
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Issue:
Does an attorney approval clause in a residential real estate contract permit a party's attorney to disapprove of the contract for reasons beyond its legal sufficiency, thereby terminating the agreement, provided the disapproval is made in good faith?
Opinions:
Majority - Gaynor, J.S.C.
Yes. An attorney approval clause in a residential real estate contract permits a party's attorney to disapprove of the agreement for nearly any reason, effectively terminating the contract, so long as the attorney acts in good faith. The court reasoned that the purpose of such a clause is to give a party, who may have signed a contract without legal advice, the opportunity to obtain the judgment of a trusted counselor. The court analogized to cases involving attorney approval of title, adopting the subjective view that the parties bargained for their attorney's personal judgment, not an objective standard of reasonableness. Therefore, the attorney's reasons for disapproval are not subject to review or contradiction, provided there is no evidence of bad faith or capriciousness. This interpretation allows the parties the full benefit of their bargain, which includes the right to cancel the contract upon receiving unfavorable legal advice on any aspect of the transaction not explicitly excluded by the clause.
Analysis:
This case establishes the broad and powerful effect of attorney approval clauses in New Jersey real estate law. It solidifies the clause as a significant contingency, giving buyers and sellers a critical 'escape hatch' after signing a realtor-prepared contract. The decision prioritizes a client's right to their attorney's unfettered, good-faith judgment over the finality of a signed agreement. This holding significantly impacts residential real estate practice by reinforcing the importance of prompt legal review and confirming that disapproval can be based on a wide range of subjective concerns, not just purely legal defects in the contract.
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