Miller v. Almquist
241 A.D.2d 181, 671 N.Y.S.2d 746 (1998)
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Rule of Law:
When a contract for the sale of real property does not make time of the essence, a party's unilateral notice making time of the essence for an adjourned closing date must provide a reasonable time period for performance, the reasonableness of which is determined by the totality of the circumstances.
Facts:
- On February 25, 1997, the buyers entered into a contract to purchase the sellers' adjacent cooperative apartment for $545,000 cash, making a $54,500 down payment.
- The contract set a closing date of April 1, 1997, but did not specify that time was of the essence.
- On March 25, 1997, the cooperative's Board of Directors approved the sale.
- On March 31, 1997, the buyers' attorney, citing delays in loan documentation, requested an adjournment of the closing to April 16, 1997.
- By letter on April 2, 1997, the sellers' attorney agreed to the new date but unilaterally declared that time was now of the essence.
- On April 14, the buyers' lender discovered old tax liens during a search; the buyers obtained proof of satisfaction of the liens by the morning of April 15.
- Because of the brief delay in resolving the lien issue, the lender was unable to close on April 16 but confirmed it could close on April 18.
- The buyers requested a two-day extension to April 18 and offered to pay the sellers' costs, but the sellers refused, declared the buyers in default for not appearing on April 16, and terminated the contract.
Procedural Posture:
- The buyers commenced an action in the Supreme Court, New York County (a trial-level court) to enjoin the sellers from terminating the contract and forfeiting the down payment.
- The sellers cross-moved for summary judgment to dismiss the complaint.
- The buyers also moved for summary judgment.
- The trial court granted summary judgment in favor of the sellers, dismissing the complaint.
- The plaintiff buyers appealed the trial court's decision to this court (an intermediate appellate court).
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Issue:
Is a party's unilateral declaration that 'time is of the essence' for an adjourned real estate closing date enforceable when the time period provided is very short and the buyer's subsequent request for a two-day extension is due to a minor, quickly-resolved documentation issue?
Opinions:
Majority - Tom, J.
No. The unilateral declaration that time was of the essence is not enforceable because the time allotted was not reasonable under the circumstances. When a contract does not make time of the essence, a party is entitled to a reasonable adjournment. While the other party may then unilaterally make time of the essence for the new date, the effectiveness of this declaration depends on the reasonableness of the time period provided. Here, the buyers' request for a very short, two-day extension was due to a common documentation issue, not bad faith. The buyers, who were inexperienced, faced significant hardship in losing both the apartment and their substantial down payment, while the sellers failed to show any prejudice from a brief delay. Given these factors, it was unreasonable for the sellers to rigidly enforce the April 16 deadline and declare a default.
Analysis:
This decision reinforces the principle that contract law, particularly in real estate transactions, is tempered by duties of good faith and fair dealing. It establishes that a 'time of the essence' clause, especially one imposed unilaterally, is not absolute and will be subject to judicial scrutiny for reasonableness. The court's multi-factor analysis signals that a party cannot use a minor, non-prejudicial delay as a pretext to terminate a contract and retain a down payment, especially when the terminating party may be motivated by other factors, such as receiving a higher offer. This case serves as a caution to practitioners against using 'time of the essence' notices as a punitive measure rather than a tool to ensure a reasonably prompt closing.
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