What happens when a buyer and a seller of a property negotiate past the purchase and sale deadline?

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The Massachusetts Appeals Court recently issued an opinion in Ferguson v. Maxim, finding that the parties' offer agreement to purchase a property was enforceable even though the parties failed to timely execute the purchase and sale agreement (which, Defendants had argued, was a term of the offer), and the deadline to execute the purchase and sale agreement could be waived by the parties.

In Ferguson, the Plaintiff alleged that he and the Defendants had a binding agreement for the sale of the Defendants' property in Leominster. The parties executed a "Contract to Purchase Real Estate," which self-identified as a "Binding Contract" and identified the property, the purchase price and deposit terms, and the time and place of closing, and set a deadline by which the parties were to execute a purchase and sale agreement (P&S).

Through counsel, the parties began to negotiate the terms of the P&S but the first draft of the P&S was not circulated until after the deadline to execute the P&S had passed, and negotiations continued thereafter. At different times, counsel for both parties suggested extending the P&S deadline, but the record did not indicate that any extensions were ever granted or denied. At one point, counsel for the Defendants' attempted to cease negotiations on the grounds that the P&S deadline had passed, before later reviving negotiations for another week, and then once again terminating negotiations. Shortly thereafter, the Defendants sold the property to a third party.

The Plaintiff filed a complaint seeking specific performance of the offer and were granted a lis pendens (a written notice that alerts prospective buyers of property to pending lawsuits that claim an interest in that property). The Defendants subsequently filed a special motion to dismiss the complaint under G.L. c. 184, § 15 (c), which authorizes dismissal of any "frivolous" action or claim on which a lis pendens is based, and also moved to dissolve the lis pendens. The trial court granted both of the Defendants' motions and the Plaintiff appealed.

The Appeals Court found that the allegations in the Plaintiff's pleadings supported a finding that the executed offer contained all of the material terms of the sale of the property, including the buyer and seller, purchase price, and date, time and place for closing. It distinguished this case from McCarthy v. Tobin, in which the enforceability of the offer was expressly conditioned upon the subsequent and timely execution of a P&S agreement. In that case, the court concluded that parties' failure to execute the P&S extinguished their obligations under the offer (although the defendant later waived the deadline to execute the P&S and the plaintiff was, thus, entitled to specific performance of the offer).

The Ferguson Court found that, unlike the offer in McCarthy, the offer in this case did not appear to have been expressly conditioned on the future execution of a P&S agreement. Additionally, it found that, even if the execution of the P&S had been an express condition subsequent, the Defendants may very well have waived that condition by continuing to negotiate the P&S past the deadline provided in the offer. The Court concluded that the offer could be viewed as the parties' completed agreement for sale of the property, and the P&S would have been "merely a polished memorandum of an already binding contract."

The Appeals Court concluded that the trial judge had erred in allowing the Defendants' special motion to dismiss, and vacated the trial court's dismissal of the Plaintiff's claim.

Tags: Real Estate, Purchase and Sale Agreement

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