Garsick v. Dehner

Nebraska Supreme Court · Contracts

ContractsSpecific performanceMutualityUnilateral mistakeReal estate purchase contractsspecific performancereal estatemutuality of contract

Facts

Defendant owned the Mayart Apartment in Omaha, which had long been listed for sale and was subject to a mortgage balance of about $11,226.81. Plaintiff, through realtors, submitted a written offer to purchase for $21,000 total, with $100 earnest money and the balance in cash above the mortgage, which plaintiff would assume and agree to pay. Defendant signed the written uniform purchase contract after discussing the mortgage amount, the cash she would receive, and related closing adjustments, and she authorized steps toward closing. When plaintiff later tendered full performance, defendant refused, claiming she had believed the price was $21,000 cash above the mortgage rather than $21,000 total subject to the mortgage.

Issue

May a seller avoid specific performance of a written real estate contract on the grounds of lack of mutuality, inequitable conduct by the buyer, or a unilateral mistake about the consideration, where the buyer tendered full performance and the written contract plainly stated the terms? Also, does a seller's claimed failure to understand or read the agreement defeat enforcement in equity?

Rule

Mutuality of contract exists when each party is obligated to do or permit something in consideration of the act or promise of the other; it is absent only when one party alone is bound or performance is optional with one side. Ordinarily, a unilateral mistake does not justify avoiding a contract unless it creates a complete difference in subject matter precluding consideration or was caused by, or known to, the other party. Courts generally will not allow a party to avoid a signed contract on the ground that she failed to read it, assumed it had different terms, or treated it as a mere form. Specific performance should generally be granted for a written contract cognizable in equity that was made in good faith, has certain and fair terms, can be enforced without hardship, and is not tainted by conduct offensive to conscience.

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In Wichita, Lena Ortiz signed a written offer to buy a duplex from Howard Pike for $340,000, with $5,000 earnest money deposited and the balance due at closing, subject to assumption of an existing loan specifically described in the contract. Howard later signed the acceptance line on the same form, but refused to close, arguing the agreement lacked mutuality because Lena had not yet paid the full price.

If Lena sues for specific performance after tendering the full amount due at closing, how should the court most likely rule on Howard's mutuality argument?

Explanation. The majority opinion states that mutuality exists when each party is obligated to do or permit something in consideration of the other's promise, and is absent only when one side alone is bound or performance is optional with one side. A written, unconditional offer accepted in writing binds both parties; earnest money and a later tender of complete performance further confirm enforceability. Howard's argument fails because the buyer need not have already paid the full price for mutuality to exist. (Derived from Garsick v. Dehner (n.d.).)