Sohayegh v. Oberlander
547 N.Y.S.2d 98, 155 A.D.2d 436, 1989 N.Y. App. Div. LEXIS 13976 (1989)
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Rule of Law:
Where a contract for the sale of real property does not initially make time of the essence, one party may unilaterally do so by sending a clear, distinct, and unequivocal notice that fixes a reasonable time for performance and warns that failure to perform by that date will result in default.
Facts:
- On April 17, 1985, the plaintiff (buyer) and defendant (seller) executed a contract for the sale of real property with a closing date set for May 20, 1985.
- The contract did not contain a 'time is of the essence' clause, nor was it contingent on the plaintiff's ability to obtain mortgage financing.
- The plaintiff was not prepared to close on May 20, 1985.
- By letter dated May 22, 1985, the defendant’s attorney notified the plaintiff of a 'final adjournment' to June 6, 1985, stating that failure to close on that date would constitute a default.
- The closing was subsequently adjourned to June 12, 1985, at which point the defendant’s attorney again warned that no further adjournments would be permitted.
- On June 12, 1985, the plaintiff did not appear for the closing and instead requested another adjournment to June 19, stating that his financing arrangements were not yet complete.
- The defendant refused to grant the further adjournment, declared the plaintiff in default, canceled the contract, and retained the plaintiff’s $8,000 down payment.
Procedural Posture:
- Plaintiff (buyer) filed an action against the defendant (seller) in the Supreme Court, Kings County (a NY trial court) seeking specific performance of the real estate contract.
- Plaintiff moved for summary judgment.
- Defendant opposed the plaintiff's motion and made a cross application for summary judgment to dismiss the complaint and declare the plaintiff in default, entitling defendant to keep the $8,000 down payment.
- The trial court granted the plaintiff's motion for summary judgment, but conditioned it on the plaintiff's consent to an appraisal to determine a new, current fair market value for the property.
- Plaintiff (as appellant) appealed to the Supreme Court, Appellate Division, from the part of the trial court's order imposing the appraisal condition.
- Defendant (as cross-appellant) appealed to the same court from the part of the order granting summary judgment to the plaintiff and denying his own cross application.
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Issue:
Does a party to a real estate contract, which does not initially make time of the essence, effectively make time of the essence by sending a clear, unequivocal notice that sets a final closing date and warns that failure to close will result in default?
Opinions:
Majority - Kunzeman, J. P.
Yes. A party to a real estate contract can unilaterally make time of the essence even if the original contract did not, provided they give proper notice. Although the law permits a reasonable time to perform when a contract is silent, a party can subsequently make performance on a specific date mandatory by giving notice that is clear, distinct, and unequivocal, fixes a reasonable time for performance, and warns that failure to close by that date will result in default. Here, the defendant’s letters of May 22 and June 5 clearly communicated a final closing date of June 12 and warned of default, thereby converting the contract into one in which time was of the essence. The time provided was reasonable, and the plaintiff's inability to secure financing was not a valid excuse as the contract was not contingent upon it. Therefore, the plaintiff defaulted, and the defendant was entitled to retain the down payment as liquidated damages.
Analysis:
This decision provides a clear framework for how a party can impose a strict deadline in a real estate transaction where the original contract was flexible. It establishes that the specific phrase 'time is of the essence' is not required in the notice, as long as the notice's intent to set a final, binding date and the consequences of default are unmistakable. This places the burden on parties who need more time to either negotiate for it or ensure their contracts contain necessary contingencies, such as for financing. The ruling strengthens the position of a performing party who is ready to close and is faced with delays from the other side.
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