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Massachusetts Appeals Court Finds Court Doesn't Have to Accept Stipulation of Contract's Validity

massachusetts_blog.jpgBreach of contract claims often involve disputes over the terms of the agreement, what occurred, and whether a party's actions constituted a breach.  Sometimes, however, there is a dispute over whether a valid contract even exists.  The existence of a valid contract is fundamental to any breach of contract claim.  To create an enforceable contract, the parties must agree on the material terms and have a present intention to be bound.

In a recent case, the Massachusetts Appeals Courts determined whether the trial court could find that there was not a valid and enforceable contract when the parties to the contract and the case stipulated that there was.  In Goddard v. Goucher, the defendant, acting as agent and attorney in fact for his mother, attempted to sell a property she held as trustee.   After receiving an offer, the defendant pulled together a team to develop a proposal for potential permitting of the property, which contained wetlands.  The team included an attorney and the plaintiff, who was an environmental engineer.  When the offer fell through, the defendant offered to sell the property to the plaintiff for one dollar and the payment of the back taxes.

The plaintiff asked the attorney from the team to draft a purchase and sale agreement.  The draft stated that the purchase price was one dollar and that the deed was to be delivered on an unspecified date in June 2007, at 10:00 a.m.  The agreement stated that the closing date could be extended for not more than 30 days.  There was also language that time was of the essence.  The plaintiff signed the agreement, and his attorney sent it to the defendant.  The defendant sent it to another attorney for review.  The defendant's attorney made handwritten revisions to the agreement, including adding language clarifying that the buyer would assume all encumbrances of record and otherwise and "all past, present, and future taxes."  The defendant signed the agreement with the revisions and returned it to the plaintiff.  The plaintiff testified that he received the signed agreement in August 2007.  The plaintiff's attorney then performed a title search on behalf of the plaintiff.

Regardless of what actually happened with the agreement, no one paid the property taxes, and the town ultimately received a judgment foreclosing and barring any right of redemption.  Nearly a year later, the plaintiff filed a petition to vacate the foreclosure petition, claiming standing as a buyer under the agreement.  The Land Court found that the plaintiff had no interest in the property and no standing to file the petition.  The plaintiff appealed, and the case was remanded, but the Land Court stayed the petition pending this case.

The plaintiff's complaint sought a declaration that the purchase and sale agreement was valid and enforceable, alleged the defendant breached the agreement, and sought specific performance through an order requiring the defendant to obtain title from the town and convey it to the plaintiff.  The town filed an answer as well as cross claims and counter claims.  The plaintiff, the defendant, and the town entered into a stipulation that the purchase and sale agreement signed by the plaintiff and defendant "was a valid and enforceable contract at the time it was entered into..."

The trial court, however, found that the revised agreement had not become a valid contract.  The court further found that the "time is of the essence" clause had not been waived.  The trial court therefore entered judgment against the plaintiff, and the plaintiff appealed.

On appeal, the plaintiff argued that it was clearly erroneous for the court to find there was not a valid and enforceable agreement in contradiction of the parties' stipulation.  The Appeals Court, however, noted that the stipulation included both facts and legal issues.  The trial court had distinguished between the two, adopting the stipulated facts but disregarding the legal conclusions and analysis contained in the stipulation.  Factual stipulations are generally binding on the parties, but a court is not bound by stipulations as to legal issues.

The Appeals Court found the stipulation here contained undisputed facts, substantial gaps that needed additional factual findings, and legal conclusions, and the trial court properly handled them all.  The judge properly rejected the stipulation that there was a valid and enforceable agreement and proceeded to engage in fact finding and analysis of the agreement.  There were multiple questions of fact that had to be decided in order to determine if a valid agreement was made.  Specifically, the trial court considered whether the plaintiff had agreed to the defendant's amendments and whether he had communicated such an agreement to the defendant.  The trial court found the plaintiff had not agreed to those changes, and that the amended language caused the plaintiff to forego signing the agreement.  The judge rejected testimony that a clean copy of the revised agreement, the dollar check, and a deed and trust were sent, and it concluded that the transaction had not been completed.  The Appeals Court found no error in the finding that there was not a valid and enforceable agreement because it was supported by a reasonable view of the evidence and rational inferences.  The Appeals Court affirmed the trial court's judgment.

It is rare for a court to find there was not a valid agreement when the parties agree one exists, but there were unusual circumstances in this case.  This case shows the importance of ensuring that the parties have agreed to the terms of a contract and that both parties have signed the same version.  It is difficult to prove the validity of a contract when the parties have signed different versions of the agreement, and one party failed to perform a requirement the other party had added before signing.  If you are buying or selling property, an experienced Massachusetts real estate attorney can help you ensure the agreement is in order.  We are here to assist you.  Call the Law Offices of Richard Mucci at (781) 729-3999 to schedule your appointment.

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