Morrison v. Bare
2007-Ohio-6788 (2007)
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Rule of Law:
The non-occurrence of a condition precedent in a contract discharges the dependent contractual duty but does not constitute a breach. Furthermore, a party who contractually conditions their performance on the verification of a representation cannot establish the 'justifiable reliance' element required for a fraud claim based on that representation.
Facts:
- Jack W. Morrison Jr., a real estate investor, viewed a house for sale owned by Jonas Bare.
- During the walkthrough with real estate agent Tom Campensa, Morrison noticed a sticker on the furnace indicating it had a cracked heat exchanger.
- After checking with Bare, Campensa represented to Morrison that the furnace had been repaired.
- Morrison submitted a written offer to purchase the house which included a 'special condition' requiring Bare to provide a copy of the 2004 furnace repair bill within 14 days.
- Morrison later signed an amendment waiving his general right to inspect the property.
- Prior to closing, Bare provided the 2004 furnace bill, which revealed that the heat exchanger had not been repaired and included a quote for a new furnace.
- Morrison then informed Campensa that he would only close if Bare replaced the furnace or reduced the purchase price.
- Bare refused to replace the furnace or reduce the price, and subsequently sold the house to a different buyer.
Procedural Posture:
- Jack W. Morrison Jr. filed a complaint against Jonas Bare, Tom Campensa, and Campensa's real estate agency in the Summit County Common Pleas Court (a trial court).
- The complaint alleged breach of contract and sought specific performance against Bare, and alleged fraud against all three defendants.
- The defendants moved for summary judgment.
- The trial court granted summary judgment in favor of all defendants on all claims.
- Morrison, as the appellant, appealed the trial court's judgment to the Ohio Court of Appeals.
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Issue:
Does a seller's failure to satisfy a special condition in a purchase agreement, which was included by the buyer to verify the seller's prior representation about the property's condition, constitute a breach of contract or provide grounds for a fraud claim?
Opinions:
Majority - Unauthored
No. The seller's failure to satisfy the special condition was not a breach of contract, and the buyer could not establish justifiable reliance for a fraud claim. The court distinguished between a promise, the breach of which creates a right to damages, and a condition, the non-occurrence of which merely excuses the other party's performance. The contract provision requiring Bare to supply a specific repair bill was a condition precedent to Morrison's duty to close, not a promise by Bare that such a bill existed or that the furnace was repaired. When Bare could not produce a bill showing the heat exchanger had been fixed, the condition failed, which discharged Morrison's duty to purchase the house but did not constitute a breach by Bare. Regarding the fraud claim, the court held that Morrison failed to establish the essential element of 'justifiable reliance.' By inserting the special condition specifically to verify Campensa's statement, Morrison demonstrated he was unwilling to rely on the verbal representation alone. His decision to 'trust but verify' was fatal to his fraud claim, as it showed he protected himself from any potential falsehood, thereby negating reliance.
Analysis:
This decision provides a clear illustration of the critical legal distinction between a contractual promise and a condition precedent, emphasizing that the failure of a condition excuses performance rather than constituting a breach. It sets a strong Ohio precedent that a buyer who contractually requires verification of a seller's representation will be unable to later claim justifiable reliance on that representation in a fraud action. The ruling underscores the importance of precise contract drafting; a party seeking to guarantee a particular state of affairs should secure an express warranty or promise, not merely a condition that allows them to exit the deal if the condition is not met.
