Pack 2000, Inc. v. Cushman
311 Conn. 662
| Conn. | 2014Background
- In 2002 Pack 2000, Inc. (plaintiff) entered lease, management and promissory note agreements with Eugene Cushman (defendant) that included five‑year options to purchase two Midas shop properties, conditioned on Pack’s compliance with the agreements.
- The agreements required periodic payments (rent due 1st of month; note payments due 8th) and various other payments (utilities, insurance, taxes) but did not make time of performance "of the essence" for most secondary obligations.
- Pack frequently tendered late payments on rent, notes, utilities, insurance and leases, though the trial court found most were paid within a commercially reasonable time and attributable to administrative inefficiency.
- Cushman never served written default notices before Pack first sought to exercise the options on August 22, 2003, and he accepted late payments for years but later refused to convey after Pack attempted to exercise.
- Trial court granted Pack specific performance, finding Pack had substantially complied and was ready, willing and able to purchase. The Appellate Court reversed, applying a strict‑compliance rule to the lessee’s performance; the Supreme Court granted certification and reversed the Appellate Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard for lessee compliance when an option is conditioned on lease performance | Substantial compliance suffices; lessee need not satisfy every trivial or immaterial term to preserve option rights | A lessee must strictly comply with lease conditions precedent to exercise an option | When an option is conditioned on lease compliance, absent explicit language to the contrary, substantial compliance governs and suffices if no material breach exists at exercise time |
| Applicability of strict‑compliance rule for exercise of the option itself | Pack properly exercised the option in the manner required | Cushman cited cases requiring strict conformity to exercise formalities | Strict compliance applies to the formal act of exercising an option (notice, tender, timing) but not to the prior substantial performance required by the lease |
| Whether Pack materially breached before exercising the option | Late payments were minor, commercially reasonable, and did not deprive Cushman of the bargain | Late and recurring payments forfeited Pack’s option rights | Trial court’s factual finding that delays were commercially reasonable and not material was supported; Pack substantially complied and retained the right to exercise |
| Whether Pack proved it was ready, willing and able to purchase | Evidence of strong operating history, previous purchases, and testimony that financing was attainable sufficed | Lack of a mortgage commitment or direct documentary proof of financing at exercise time shows Pack could not complete purchase | Proof of firm financing commitment not always required when seller repudiates; evidence supported the trial court’s finding that Pack could have obtained financing and was ready, willing and able |
Key Cases Cited
- Brauer v. Freccia, 159 Conn. 289 (1970) (option conditioned on punctual rent payments; lessees materially in arrears were denied specific performance)
- Bayer v. Showmotion, Inc., 292 Conn. 381 (2009) (describes nature of option as continuing offer; exercise creates binding contract)
- Steiner v. Bran Park Associates, 216 Conn. 419 (1990) (buyer seeking specific performance must prove readiness, willingness and ability to purchase; documentary mortgage commitment not always required)
- Romaniello v. Pensiero, 21 Conn. App. 57 (1990) (a plaintiff may prove he could have obtained mortgage financing when seller’s refusal makes preparation futile)