Shimrak v. Goodsir, 2014 Ohio 3716

Background

In May 2006 Susan Goodsir (successor trustee) agreed to sell a house to Peter and Patricia Shimrak; the buyers paid $2,000 earnest money and set closing for Aug. 24, 2006.
Paragraph E of the purchase agreement contained a financing contingency: buyer must apply for a mortgage within 5 days, and if the loan was neither approved nor denied within 30 days after acceptance, the buyer "may either request a written extension or remove this contingency in writing;" if denied, or if seller refuses extension and buyer does not remove contingency, the agreement becomes null and void.
The Shimraks applied but did not obtain a lender commitment; by Aug. 7 they were told their lender would approve only upon sale of their own home; they proposed an addendum making the purchase contingent on sale of their house, which Goodsir rejected.
On Aug. 18 the Shimraks withdrew from the transaction; Goodsir later re-sold the property for a lower price and sued for breach; the trial court declared the contract void and returned earnest money to the Shimraks.
On appeal the court had to interpret Paragraph E: whether the buyer was required to choose one of two options after the 30-day period, whether the buyers’ addendum constituted an extension request, and whether the buyers timely exercised any option.

Issues

Issue	Shimrak (Plaintiff) argument	Goodsir (Defendant) argument	Held
Interpretation of "may either request a written extension or remove this contingency"	"May" makes both listed options discretionary; buyer could choose one, both, or neither, and could walk away if financing unresolved	"Either" makes choosing one of the two options mandatory after 30 days; buyer must act	Court of appeals: buyer must choose one of the two options; "either" renders a mandatory choice and "may" only describes discretion among the two options
Can buyer simply do nothing and later withdraw if financing unresolved?	Yes — absence of time frame allows buyer to decline performance if financing not approved or denied	No — doing nothing is not authorized; buyer must act and cannot defeat contract by their own failure to perform	Held no implicit "do nothing" option; buyers could not unilaterally let time pass and then renege
Was the Shimraks’ Aug. 7 addendum (contingent on sale of their home) a request for an extension under Paragraph E?	Yes — trial court treated it as an extension request; or, lender’s condition equaled denial	No — an added contingency is a different, substantive contract change, not a mere extension request	Court of appeals: not an extension; it was a third, unauthorized option, so buyers did not elect one of the contract’s two options
Did the Shimraks timely exercise an option after the 30-day period expired?	Lender’s Aug. 7 statement effectively denied financing; buyers could treat contract as void	Buyers failed to act within a reasonable time after the 30-day window and thus breached; subsequent denial cannot cure earlier breach	Court of appeals: buyers waited unreasonably (30-day expired June 24; buyers first informed seller Aug. 7); they breached and cannot rely on a later denial to excuse that breach

Key Cases Cited

In re All Kelley & Ferraro Asbestos Cases, 104 Ohio St.3d 605 (Ohio 2004) (contract interpretation is a question of law; give words plain meaning)
Penn Traffic Co. v. AIU Ins. Co., 99 Ohio St.3d 227 (Ohio 2003) (contract words are given their ordinary meaning to ascertain parties’ intent)
Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (Ohio 1978) (avoid interpretations producing manifest absurdity; consider face and overall contents)
State ex rel. Toledo Edison Co. v. Clyde, 76 Ohio St.3d 508 (Ohio 1996) (ambiguous contract language is susceptible to more than one interpretation)
Ed Schory & Sons v. Francis, 75 Ohio St.3d 433 (Ohio 1996) (good faith is an implied covenant filling contractual gaps)
E. Ohio Gas Co. v. Akron, 81 Ohio St. 33 (Ohio 1909) (silence in a contract differs from ambiguity)