Morton v. 4 Orchard Land Trust: No Oral Agreement to Sell Home

New Jersey’s highest court has considered whether the fact that the seller’s attorney reviewed sales contract for home demonstrated that a valid sale agreement existed between buyer and seller.

Frederick A. Morton, Jr. (“Buyer”) hired real estate salesperson Laurena White (“Salesperson”) to help him locate a home. The Salesperson and the Buyer visited a property owned by the 4 Orchard Land Trust (“Seller”). Following the visit, the Buyer directed the Salesperson to submit an offer for the property. The Salesperson submitted an offer, and she was told that the Seller had already accepted another offer but would consider other offers during the attorney review period. So, the Salesperson submitted an offer on July 31st, raising the amount of the offer the next day.

On August 2nd, the Seller informed the Salesperson that they were able to “get out” of the contract with the original buyer, and so the Seller accepted the Buyer’s contract. The purchase contract contained a three-day attorney review clause, and the Seller told the Salesperson that the Seller’s attorney would soon be in touch with the Buyer’s attorney. Later that day, the Seller’s attorney forwarded a list of requested changes. Meanwhile, the Salesperson requested a copy of the signed purchase agreement from the Seller, with the Seller allegedly informing the Salesperson that she would receive the signed agreement shortly.

On August 3rd, the Seller’s attorney sent to the Buyer’s attorney a letter requesting additional modifications to the purchase agreement. Later that same day, the Seller’s attorney faxed a letter to the Buyer’s attorney declaring the agreement “null and void”. On August 6th, the Buyer learned of the Seller’s attempt to cancel the purchase agreement. However, his attorney advised him that the Seller’s attempt to cancel the purchase agreement did not conform to the terms of the purchase agreement, since the purchase agreement required such notice to delivered by certified mail to the Salesperson. Therefore, the Buyer instructed his attorney to accept the changes proposed by the Seller’s attorney and proceed as if there was a valid contract between the parties. When the Buyer proceeded in this manner, the Seller’s attorney stated that there was not a valid contract between the parties because the Seller had never signed the purchase agreement.

The Buyer filed a lawsuit seeking performance of the purchase contract as well as filing a notice of lis pendens against the property (this provides notice to potential purchasers that the property is subject to litigation). The Seller sought to have the lis pendens notice removed from the public records as well as dismissal of the Buyer’s lawsuit. The trial court agreed with the Seller that there was no valid contract between the parties and so dismissed the lawsuit as well as the lis pendens notice. Following the dismissal, the Seller sold the property to the original buyer. An appellate court affirmed the trial court’s rulings, and the Buyer appealed.

The Supreme Court of New Jersey affirmed the lower courts. The Buyer argued that he entered into an enforceable oral agreement with the Seller. While the Statute of Frauds in many states bars oral agreements for real estate transactions, New Jersey’s Statute of Frauds does not bar oral agreements in real estate transactions if a party can show either of the following: a sufficient identification of the property to be transferred, identification of the interest to be transferred, identification of the parties to the transaction, and the existence of the agreement are established in a writing by or on behalf of the party against whom enforcement is sought; or, a sufficient identification of the property to be transferred, identification of the interest to be transferred, identification of the parties to the transaction, and the existence of the agreement proved by clear and convincing evidence. Commentary associated with the Statute of Fraud’s revisions in New Jersey stated that one of the guides courts should use to determine if the parties had entered into a valid oral real estate contract are factors like past dealings between the parties and whether the parties exhibited an intention to be bound by the agreement, even without a writing.

Looking at the dealings between the parties, the court found the evidence demonstrated that the parties had intended to be bound only by a written agreement. The contract itself stated that it only bound the parties who signed it, and the Salesperson had requested a signed copy of the purchase agreement from the Seller to help complete the transaction. The court also found that none of the conversations between the parties demonstrated an intent to be bound by an oral agreement. The court also ruled that the Seller’s attorney’s failure to follow the cancellation procedures outlined in the purchase agreement was not relevant, as these the Seller was not bound by these terms because the Seller had never signed the purchase agreement. Thus, the court affirmed the rulings of the lower courts.

Morton v. 4 Orchard Land Trust, 849 A.2d 164 (N.J. 2004).