by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
Anyone who has bought or sold real estate in New Jersey is familiar with "attorney review." When you buy or sell a house, you sign a contract that is almost always prepared by a broker. The contract must contain a standard provision stating that the buyer and seller have the right to have an attorney review the contract. This "attorney review" period lasts three days. The contract becomes legally binding if, at the end of that three-day period, neither the buyer's nor the seller's attorney disapproves of the contract. If either side disapproves, their attorney must notify the other side's broker by certified mail, telegram, or personal service. In Conley v. Guerrero, a case that seems to be a case study in the concept of raising form over substance, the New Jersey Supreme Court updated this requirement to allow the notice of disapproval to also be sent by fax or email. (Those of you still using telegrams may be out of luck, however, because this no longer appears to be an appropriate method of service for the notice of disapproval.)
In Conley, plaintiffs signed a form contract to purchase a condominium unit from sellers. It contained the standard "attorney review" provision. After signing the contract, but during the attorney review period, sellers received competing offers to purchase the property and eventually entered into a new contract to sell it to a new buyer for a higher price. Sellers' attorney sent a disapproval of plaintiffs' contract to both plaintiffs' counsel and the broker (who was a duel agent represented both plaintiffs and seller) during the attorney-review period. He sent the notice via email, which plaintiffs' counsel and the agent acknowledged receiving within the attorney review period. Nonetheless, plaintiffs claimed that the sellers were bound by the contract and had to sell to his clients because the disapproval was not sent in the proscribed manner — by certified mail, telegram, or hand delivery.
Plaintiffs sued, seeking specific performance. Both sides moved for summary judgment. The Chancery Division granted defendants' motion and dismissed the complaint. The Chancery Division held that, while seller did not comply with the method-of-delivery requirements set forth in the contract, this breach was only "minor" because plaintiffs' counsel acknowledged receiving the notice within the attorney review period. Therefore, the Chancery Division held that the "underlying justification for the attorney review clause" — to protect parties against being bound by broker-prepared contracts without the opportunity to review them with their attorneys — was accomplished.
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