W.W.W. Associates, Inc. v. Giancontieri
548 N.Y.S.2d 580, 152 A.D.2d 333, 1989 N.Y. App. Div. LEXIS 16875 (1989)
Rule of Law:
A contingency clause in a real estate contract, even if it explicitly states that 'either party' may cancel, can be unilaterally waived by the party for whose sole benefit it was inserted, provided the waiver is timely.
Facts:
- On October 16, 1986, Frank and Louis Giancontieri (sellers) agreed to convey a two-acre parcel of real property in the Town of Babylon, Suffolk County, to W.W.W. Associates, Inc. (purchaser).
- A notice of pendency had been filed against the property due to a third-party action commenced against the Giancontieris.
- The existence of the notice of pendency was a concern for W.W.W. Associates as it posed potential problems for obtaining a construction loan and procuring title insurance.
- At W.W.W. Associates' request, clause 31 was inserted into the contract, stating: 'in the event such litigation is not concluded, by or before 6/1/87 either party shall have the right to cancel this contract'.
- In March 1987, W.W.W. Associates was allegedly informed that the Giancontieris were not actively defending the underlying action and were waiting for June 2, 1987, to cancel the contract.
- W.W.W. Associates subsequently determined that it could obtain financing and title insurance despite the pending litigation and the notice of pendency, and elected to waive its right to cancel.
- On May 13, 1987, W.W.W. Associates notified the Giancontieris in writing of its desire to close title and scheduled a closing for May 28, 1987.
- The Giancontieris rejected W.W.W. Associates' offer to close, stating the litigation was still pending, and explicitly chose to ignore the demand and cancel the contract pursuant to the litigation contingency provision.
Procedural Posture:
- On or about May 30, 1987, W.W.W. Associates, Inc. commenced an action in the Supreme Court, Suffolk County (trial court/court of first instance), against Frank and Louis Giancontieri for specific performance of the contract.
- The Giancontieris moved for summary judgment dismissing the complaint.
- The Supreme Court, Suffolk County, by order and judgment dated November 20, 1987, granted summary judgment in favor of the Giancontieris and dismissed the complaint on the ground that the agreement was clear and unambiguous and conferred a right on either party to cancel.
- W.W.W. Associates, Inc. (appellant) appealed the Supreme Court's order and judgment to the Appellate Division of the Supreme Court of New York, Second Department, arguing that the contingency provision was intended solely for its benefit.
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Issue:
Does a seller have the right to unilaterally cancel a real estate contract based on a contingency clause that permits 'either party' to cancel, when that clause was intended for the sole benefit of the purchaser, and the purchaser has timely waived the condition?
Opinions:
Majority - Spatt, J.
No, the seller does not have the right to unilaterally cancel the contract under these circumstances. The court found that clause 31, which allowed either party to cancel if litigation was not concluded by June 1, 1987, was intended for the sole benefit of W.W.W. Associates, the purchaser. A party for whose sole benefit a condition is included in a contract may waive that condition prior to its expiration and accept the contract in an 'as is' condition, even if the clause's language technically grants cancellation rights to both parties. The court cited precedents like BPL Dev. Corp. v Cappel and De Freitas v Holley, which established that the clear intent of the parties, discerned from the clause's language and actual impact, is paramount. W.W.W. Associates sought this clause to protect itself from issues with financing and title insurance due to the notice of pendency, and the Giancontieris failed to demonstrate any benefit to themselves from this specific clause. Since W.W.W. Associates timely and implicitly waived the condition by expressing its willingness to close, the Giancontieris' refusal to close constituted a breach of the agreement. Exercising its power to search the record, the Appellate Division granted summary judgment to W.W.W. Associates, directing specific performance of the contract.
Analysis:
This case significantly clarifies the interpretation of contingency clauses in real estate contracts, particularly those that state 'either party' may cancel. It establishes that the intent behind the clause's inclusion, and who it was truly meant to benefit, overrides the literal 'either party' language. The ruling provides a critical framework for determining when a party can unilaterally waive a condition, preventing opportunistic cancellations by parties not genuinely protected by the contingency. This impacts future cases by requiring courts to delve beyond the surface text to discern the true purpose and beneficiary of such clauses, thus enhancing fairness and upholding the original contractual intent in real estate transactions.
