Brack v. Brownlee

• Decision Date: 09 January 1981
• Docket Number: No. 36586,36586
• Citation: 246 Ga. 818,273 S.E.2d 390
• Parties: BRACK et al. v. BROWNLEE et al.
• Court: Georgia Supreme Court

Page 390

273 S.E.2d 390

246 Ga. 818

BRACK et al. v. BROWNLEE et al.

No. 36586.

Supreme Court of Georgia.

Submitted Sept. 9, 1980.

Decided Oct. 29, 1980.

Rehearings Denied Dec. 4, 1980 and Jan. 9, 1981.

Tennant, Andersen & Davidson, T. Michael Tennant, Lawrenceville, for appellants.

Kilpatrick & Cody, Thomas C. Harney, Atlanta, for appellees.

NICHOLS, Justice.

Appellants are purchasers of real property who brought this action for specific performance of a real estate sales contract. The trial court found that the contract was unenforceable and entered judgment for appellees, the vendors of the property. This court reverses.

Appellants made an offer to purchase appellees' land for $48,900.00. Appellees counter-offered to sell for $51,900.00. Appellants accepted this offer and paid $1,000.00 earnest money to the real estate broker who listed appellees' property. Appellees were notified of appellants' acceptance. Shortly after reaching this agreement, the appellees were offered a second contract on the property for $57,000.00. The appellees also agreed to this second contract which required them to defend any action arising from the first contract. The day after making the first agreement appellees "rejected" their contract with appellants "on the basis that the terms of such purported contract were too vague and indefinite to be enforceable, there thereby being no mutuality of obligation thereunder." Nevertheless, the appellants proceeded to comply with the contract, obtained a loan, and were prepared to close at the time specified in the contract. Appellees did not close and the appellants brought this action.

The sole issue on appeal is whether the contract could legally be rescinded by the vendors. Appellees claim the contract provision providing that "this contract is contingent upon purchaser being able to secure (adequate) financing" allows the seller to rescind or reject the contract because it lacks mutuality. This court disagrees.

It is undisputed that appellants paid $1,000.00 earnest money to the real estate agent who listed appellees' property for sale. Apparently, the appellee did not refund this earnest money when he attempted to rescind the contract. This money was paid to secure appellees' promise to convey the property at closing. Appellants, of course, agreed to purchase the property. This exchange of promises by the parties and appellants' payment of earnest money provided consideration for the contract. Thus appellees' claim that the contract lacked mutuality of obligation is incorrect. "Where there is no other consideration for a contract, the mutual promises must be binding on both parties, for the reason that only a binding promise is sufficient consideration for a promise of the other party ..." 17 Am.Jur.2d Contracts, 348, § 11. But "(w)here there is any other consideration for a contract so that each promise does not depend upon the other for consideration, mutuality of obligation is not essential." Crawford v. Baker, 207 Ga. 56, 60, 60 S.E.2d 146 (1950) (emphasis added). Mutuality is not required where there is consideration other than mutual promises. Id. See also 6 EGL 90 Contracts, § 39 (1978) and 17 Am.Jur.2d Contracts, 448, §§ 104-108. Here the payment of money by the purchasers and the vendors' promise to sell provided adequate consideration for their contract. Such an agreement is not illusory, and both parties are committed to a binding agreement. Restatement, Second, of Contracts, §§ 77 and 81; 1A Corbin on Contracts, § 152; J. Calamari and J. Perillo, Contracts, §§ 67-75 (1970). Potts v. Smith, 134 Ga.App. 737, 215 S.E.2d 697 (1975) and Alodex Corp. v. Brawner, 134 Ga.App. 630, 215 S.E.2d 527 (1975) are overruled.

Appellees argue that the financing condition creates a contingency which allows the appellants "to escape from the contract at any time without liability." Because of this, appellees contend, the contract is void. Under Georgia law the purchasers may not "escape" from the obligations of their agreement. It has frequently been held that the purchaser has an implied duty "to diligently seek to have (the financing) contingency take place." Warren v. Camp, 232 Ga. 681, 682, 208 S.E.2d 489 (1974). This implied duty must be exercised in good faith. Fourteen West Realty v. Screws, 147 Ga.App. 362, 248 S.E.2d 722 (1978). See generally 78 A.L.R.3d 880. Therefore, the appellants could not avoid their obligations under the contract. Because of this implied duty a contract for the sale of real property which is conditioned upon the purchaser's ability to obtain a loan is not unenforceable for lack of mutuality of obligation. See Restatement, Second, of Contracts, §§ 250-252, especially comment a, illustration 4 to § 252. Accord, Solberg v. Kane, Mo.App., 536 S.W.2d 885 (1976).

Similarly, a vendor has an implied duty under a sales contract to allow the purchaser a reasonable time within which to obtain financing. If no time limit were specified, this reasonable time would be inferred and would be a question for the factfinder. Whitley v. Patrick, 226 Ga. 87, 172 S.E.2d 692 (1970). See 28 E.G.L. 304, Vendor and Purchaser, § 20. In this case, however, the parties agreed that the sale would be closed on or before January 15 1979. Thus, the contract itself provides that the purchaser has at least until January 15 to obtain financing. See Belk v. Nance, 232 Ga. 264, 206 S.E.2d 449 (1974). "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement." Restatement, Second, Contracts, § 231. Accord, Code Ann. § 109A-1 203. Therefore, the appellees' repudiation of the contract the day after it was accepted was an anticipatory breach of the appellees' duties under the contract. Accord Carroll v. Wied, Tex.Civ.App., 572 S.W.2d 93 (1978).

It should also be noted that the financing condition was for the purchasers' protection, Whitley, 226 Ga. at 89, 172 S.E.2d 692, and they could have waived the provision. Obviously the purchasers must obtain financing or otherwise comply with the contract terms requiring them to pay the vendors the purchaser price at closing. But the precise manner in which the funds are obtained is irrelevant to the vendors. See Edwards v. McTyre, 246 Ga. 302, 271 S.E.2d 205 (1980). In fact, a contract from a vendor's viewpoint would be complete without any provision to protect a purchaser who cannot obtain financing. G. Pindar, Ga. Real Est. Law, § 18-14 (1979). However, many real estate contracts contain such financing conditions. If a vendor could successfully utilize this contract term (which is unquestionably for the buyer's protection) to rescind the contract at any time prior to the occurrence of the condition (presumably whenever the vendor received a better offer), a purchaser would never be able to rely on the contract while he sought financing. Any vendor could rescind such a contract with impunity. This result would be intolerable and would destroy the good faith reliance among individuals which permits them to act in accordance with their agreements.

As a final argument appellees assert that the financing condition is too vague and not binding on the purchasers rendering the entire contract illusory for lack of mutuality. In view of our determination above that mutuality is not required where there is consideration for a contract other than merely mutual promises, appellee's argument is without merit.

The record here shows that appellants did obtain financing and were ready to perform on the day set for closing. Tender was rejected by the appellees, although tender is not required where the vendor has indicated he will not accept it. McLoon v. McLoon, 220 Ga. 18, 136 S.E.2d 740 (1964). Based on the foregoing discussion, this court holds that the appellees' attempt to rescind the contract was invalid. The appellants are entitled to specific performance of the contract.

Judgment reversed.

All the Justices concur, except UNDERCOFLER, C. J., who concurs in the judgment only.

ON MOTION FOR REHEARING

Appellees cite several cases ¹ which have held that a contract lacks mutuality, is unenforceable, and void where the financing provision is too indefinite. These cases for the most part are factually different from this case in that they involved efforts by the purchasers to obtain a refund of their earnest money. Nevertheless the basis for the decisions in these cases (i. e., that a contract containing a vague, ancillary financing clause lacks mutuality and is not a valid contract) is implicitly overruled by our decision in this case. ² We have held here that this financing clause does not vitiate the entire contract for sale ³ and that the seller cannot rightfully rescind his bargained for agreement under these facts. This is especially true in view of the fact that the financing condition is inserted for the purchasers' protection, and that so long as the purchasers' comply with their primary obligation to pay the purchase price at closing, the precise manner in which the funds are obtained is irrelevant to the vendors. Whitley, supra, and Edwards, supra.

Appellees also argue that this opinion's change in the application of the mutuality...