Cancellation of Real Estate Contract By Email Finally OK

The New Jersey Supreme Court ruled on April 3, 2017 in Conley v. Guerrero, that residential real estate contracts can properly be cancelled by email or fax.  The central issue in the case was whether the Defendant-Seller of a residence effectively terminated the Contract for Sale with Plaintiffs-Buyers during the “three day” attorney review period set forth in the Contract for Sale.

None of the parties disputed the facts of the case.  The Buyer and Seller signed a Contract For Sale that included the standard attorney review clause, mandated by the Court in New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, 93 N.J. 470, 476-77 (1983), modified, 94 N.J. 449 (1983), and N.J.A.C. 11:5-6.2(g)(2), which gave the parties’ respective attorneys three business days to review the contract before it became legally binding.  Specifically, the “three day attorney review” clause, provided:
The Buyer or the Seller may choose to have an attorney study this Contract. If any attorney is consulted, the attorney must complete his or her review of the Contract within the three-day period. This Contract will be legally binding at the end of this three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the Contract . . . If an attorney for the Buyer or the Seller reviews and disapproves of the Contract, the attorney must notify the REALTOR(S) and the other party named in this Contract within the three-day period. Otherwise this Contract will be legally binding as written. The attorney must send the notice of disapproval to the REALTOR(S) by certified mail, by telegram or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal delivery will be effective upon delivery to the REALTOR’s office. The attorney may also, but need not, inform the REALTOR(S) of any suggested revision(s) in the Contract that would make it satisfactory.
After the Contract For Sale was executed, Seller received a competing offer and entered into a Contract with a third party.  The Seller’s attorney sent a letter via email and fax advising Plaintiffs’ attorney that the agreement was terminated, stating, “This will confirm that the above referenced contract has been terminated by the seller and the realtors are hereby authorized to release the initial deposit monies to the buyers.”  It was undisputed that Plaintiffs’ attorney and the agent received the letter within the three-day period.

Despite having received the letter terminating the Contract, Plaintiffs’ attorney faxed a letter to Defendant’s attorney asserting that the original contract was in “full force and effect.” because “the 3 days within which an attorney may terminate this contract has expired.” The Buyers argued that the Sellers were required to strictly adhere to the contractual provision specifying the methods of delivery as certified mail, by telegram or by delivering it personally, even though the Buyers’ attorney admitted that the Buyers received the cancellation notice.

The Court found that strict enforcement of the contractually identified methods of delivery would frustrate the contract’s overarching purpose and elevate form over the protective reasons for the attorney-review provision.  Therefore, the Court held, “notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days.”  This case finally brings New Jersey residential real estate contracts into the digital age.

The attorneys at Bathgate, Wegener & Wolf, P.C. are well versed in all aspects of residential real estate contracts.  If you have questions about your real estate contract, please contact us at 732-363-0666.