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COUNTEROFFERS, CONDITIONAL ACCEPTANCES & REJECTIONS, OH MY!

A recent Land Court case, while not binding authority, reminds us yet again of how much the forming of a valid contract for the sale of land hinges on the language communicated by and between the parties during the offer and acceptance phase.

Here are the basic facts from Host v. Gray, 10 MISC444079(HMG) (Mass. Land Ct. April 2, 2013), 2013 WL 1319609:

  • Defendant-seller owned adjoining lots, Lots 18 and 19. Lot 19 was improved with a house. Access to Lot 19 was over a portion of Lot 18, and had no independent access of its own to the direct frontage.
  • Lot 19 was listed for $2.45M. The seller wished to retain Lot 18.
  • Plaintiff-potential buyer visited Lot 19 and indicated to the broker that access via Lot 18 would need to be discussed before he would agree to purchase Lot 19. They discussed this possibility.
  • Potential buyer delivered an Offer to Purchase (OTP) (Massachusetts Association of Realtors' Contract to Purchase Real Estate form) Lot 19 AND Lot 18 for $2.45M. Acceptance of the offer required the seller to sign the OTP and return it to potential buyer.
  • Seller's broker responded vial email as follows:

Thank you for your offer on Howard Gleason Road . . . This is a conditional response until further items can be worked out to your and her benefit. She is accepting the offer for $2,450,000 but proposes working out a solution to Lot 18 that is mutually agreeable to both parties.

Essentially, [seller] would like to accept the offer and work out the conditions. The difficulty has been how to divide up Lot 18. She needs a portion of that for the cottage [that she owns]. But she is willing to work with you ... Again, we would have to meet and be precise and have to have new lot lines drawn.

  • Neither seller nor the broker signed the OTP.
  • Despite subsequent discussions regarding the division/partial sale of Lot 18, the parties were unable to reach a mutually satisfactory solution.
  • No Purchase and Sale agreement was ever drafted or signed.
  • Seller informed potential buyer's broker that she did not intend to proceed with the offer.
  • Potential buyer nonetheless showed up at the registry on the scheduled closing date with a bank check. Seller did not appear.
  • Potential buyer's lawsuit ensued seeking specific performance of the terms of his OTP, and filed a motion for summary judgment.

The Land Court (Grossman, J.) ultimately decided that there was no valid contract formed between the parties, and set forth some black letter law throughout the decision.

First, the court determined that there was no contract because not only was the OTP not properly accepted (i.e. no signed OTP delivered to buyer). The emailed response to the OTP was not effective and simply did not function as an acceptance, and was instead deemed a rejection.

Moreover, even if the emailed response were to be construed as an attempted acceptance, there was no agreement regarding a material term of the contract, namely the precise piece of property to be conveyed. See McCarthy v. Tobin 429 Mass. 84, 87 (1999). As the court noted,

Here, the Response indicates a lack of intent to be presently bound on the part of defendant, and includes a wholly different property description from that specified in the offer. The Offer to Purchase sets out the material terms for a sale of real property: the property description (Lot 18 and 19), the price ($2,450,000), and a closing date (November 23, 2010).

If the Response is to function as an acceptance and thereby create a contract, it must be unconditional, unqualified, and consonant with the material terms set out in the Offer. See Moss v. Old Colony Trust Co., 246 Mass. 139, 148 (1923).

Id. at *5. The court went on to note that the seller here, through the plain language contained in the broker's emailed response, showed no intent to be presently bound by the potential buyer's terms. Only the price was acceptable, but that is not enough to create a binding contract for sale. At best, the court points out, the emailed response might have been a "conditional acceptance", but as Moss sets forth, this is akin to a rejection as well. See Moss at 148.

The court held that there was no binding contract between the parties and therefore no basis for the plaintiff's claims. The emailed response was a counteroffer (which functioned as a rejection of the OTP), and one that was never accepted so no binding contract was formed. "While a response that proposes additional terms may function as an acceptance sufficient to create a contract, . . . a response that contemplates different terms is, in effect, a counteroffer." Host at *6 (citations omitted).

The takeaway from this case, and the countless others like it, is that buyers and sellers alike (and their agents and brokers) must be careful when articulating their responses to offers. Imprecise communications and follow-up can have the unintended consequence of resulting in a counteroffer, conditional acceptance and/or wholesale rejection of an agreement that might otherwise be viable if not enforceable.

Written by Kristen M. Ploetz, Esq., of Green Lodestar Communications & Consulting, LLC, on behalf of Jeffrey T. Angley, P.C. Edited by Jeffrey T. Angley, Esq.

Copyright (c) 2011-2013 by Jeffrey T. Angley, P.C. All rights reserved.

Disclaimer: The information contained in this post is general in nature and for educational purposes only. No personal legal advice is being provided. If you have an actual legal issue that needs to be addressed, you should seek the advice of competent legal counsel. This post does not create an attorney-client relationship between the reader and Jeffrey T. Angley, P.C., Phillips & Angley or their attorneys.

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