GIANNETTI v CORNILLIE
Docket No. 135381
Court of Appeals of Michigan
March 21, 1994
204 MICH APP 234
Submitted October 5, 1993, at Detroit. Decided March 21, 1994, at 9:30 A.M. Leave to appeal sought.
The Court of Appeals held:
1. The trial court erred in finding that there was a contract where the defendants never agreed to the plaintiffs’ change in the mortgage amount. It is clear from the terms of the purchase offer that the obligation to buy the property was contingent upon the plaintiffs’ ability to obtain a thirty-year conventional mortgage in the amount written on the form. By changing the mortgage amount, the plaintiffs modified a condition precedent to the existence of a binding agreement. Therefore, the modification was material and the plaintiffs’ purported acceptance was only a counteroffer. Because the modification was not initialed by the defendants, the contract was void under the statute of frauds,
2. Although the plaintiffs obtained the requisite mortgage
Reversed.
TAYLOR, P.J., dissenting, stated that all the elements of a real estate contract were present in this case. The trial court, by discerning as a question of fact what the parties intended, properly determined that a change in the manner in which the consideration was to be paid did not constitute a material change in the contract terms such that no meeting of the minds occurred. The court properly ascertained whether the defendants thought the change in the mortgage amount was material by looking at the defendants’ conduct after seeing the change, and properly concluded that the defendants’ actions evidenced their belief regarding a meeting of the minds and their position regarding a valid contract.
1. CONTRACTS — OFFERS — COUNTEROFFERS.
An offer is a unilateral declaration of intention and is not a contract; a counterproposal is not an acceptance of an offer; a proposal to accept, or an acceptance, upon terms varying from those offered, is a rejection of the offer and puts an end to the negotiations unless the party who made the original offer renews it or agrees to the suggested modification.
2. CONTRACTS — OFFERS — COUNTEROFFERS — MATERIAL ALTERATIONS.
A contract is made when both parties have executed or accepted it; an acceptance must be unambiguous and in strict conformance with an offer; any material departure from the terms of an offer invalidates the offer as made and results in a counter-proposition that, unless accepted, cannot be enforced; it is only by determining the legal effect of an instrument before and after an alteration that it is possible to decide whether the change is material.
Lizza & Mulcahy, P.C. (by John B. Lizza), for the plaintiffs.
Rupp, Ehrlich, Foley & Serwer, P.C. (by Joseph H. Ehrlich), for the defendants.
HOOD, J. Defendants appeal as of right from the trial court‘s judgment granting plaintiffs’ petition for specific performance of an alleged agreement to sell real estate. Plaintiffs cross appeal from the trial court‘s determination of damages. We reverse.
Defendants were the copersonal representatives of their mother‘s estate. In that capacity, they listed her home for sale with a real estate agent. Plaintiffs offered $155,000 for the home and submitted a $2,500 deposit. Defendants counteroffered to sell the home for $160,000.
Upon receiving the counteroffer, plaintiffs orally inquired whether certain items could be included with the home.1 Defendants declined. Plaintiffs then purportedly accepted the counteroffer, but changed the mortgage amount from $124,000 to $128,000 and initialed the change. The real estate agent did not submit this modification for defendants’ approval, but, rather, told defendants that plaintiffs had accepted their counteroffer. Defendants signed all the necessary probate court papers for the sale of the property. However, before the closing, defendants sought to rescind the deal.2 Plaintiffs declined and sued for specific performance.
Defendants’ main argument is that the trial court clearly erred in finding that there was a contract where defendants never agreed to plain-
As argued by defendants, “[a]n offer is a unilateral declaration of intention, and is not a contract. A contract is made when both parties have executed or accepted it, and not before. A counterproposition is not an acceptance.” Kamalnath v Mercy Memorial Hosp Corp, 194 Mich App 543, 549; 487 NW2d 499 (1992) (citations omitted). An acceptance must be “unambiguous and in strict conformance with an offer.” Dassance v Nienhuis, 57 Mich App 422, 431; 225 NW2d 789 (1975). “[A] proposal to accept, or an acceptance, upon terms varying from those offered, is a rejection of the offer, and puts an end to the negotiation, unless the party who made the original offer renews it, or assents to the modification suggested.” Harper Bldg Co v Kaplan, 332 Mich 651, 656; 52 NW2d 536 (1952) (quoting Thomas v Ledger, 274 Mich 16, 21; 263 NW 783 [1935]). Thus, “[a]ny material departure from the terms of an offer invalidates the offer as made and results in a counter proposition, which, unless accepted, cannot be enforced.” Harper, supra at 655 (quoting Carrollton Acceptance Co v Ruggles Motor Truck Co, 253 Mich 1, 5; 234 NW 134 [1931]).
Plaintiffs argue that the modification of the mortgage amount did not vitiate their purported acceptance because the mortgage amount, unlike the purchase price, was not a material term of the contract. We disagree.
It is clear from the terms of the purchase offer that the obligation to buy the property was “contingent upon [the] Purchaser‘s ability to obtain a 30 year conv[entional] mortgage” in the amount written on the form. Thus, by changing the mortgage amount, plaintiffs modified a condition precedent to the existence of a binding agreement.
In other words, before the change, plaintiffs were obligated to buy the property if they obtained a mortgage for $124,000; after the change, no obligation to buy arose unless they obtained a $128,000 mortgage. Thus, the modification had the legal effect of widening the door through which plaintiffs could escape the contract and it was therefore material. See Anderson v Donato, 224 Mich 216, 218; 193 NW 805 (1923) (“It is only by determining the legal effect of the instrument before the alteration and after the alteration that it is possible to decide whether the change is material or not.“). Because the modification was not initialed by defendants, the contract was void under the statute of frauds.
Because the purchase offer itself clearly states that “no promises have been made other than those that are in writing and signed by all parties involved (no verbal agreements will be binding),” we may not consider plaintiffs’ contention that, although the purchase offer does not say so, the parties contemplated that eighty percent of the purchase price would be financed and that their modification of the mortgage amount merely reflected that understanding. Likewise, the fact that plaintiffs obtained the $128,000 mortgage does not constitute partial performance sufficient to take the alleged agreement out of the operation of the statute of frauds. See Thorbahn v Walker‘s Estate, 269 Mich 586, 591; 257 NW 892 (1934) (neither full nor partial payment is sufficient to take an agreement relating to realty out of the statute of frauds). The same is true of defendants’ execution of the appropriate sale documents with the probate court.
In light of our decision, it is unnecessary to consider defendants’ argument that plaintiffs voided the agreement by not applying for a mortgage within five days.3 We also decline to consider plaintiffs’ cross appeal regarding the calculation of damages.
Reversed.
B. A. JASPER, J., concurred.
TAYLOR, P.J. (dissenting). In the present case, the plaintiffs (buyers) offered $155,000 for the house, indicating that $124,000 of that sum (eighty percent of the purchase price) was to be secured by a mortgage. Defendants (sellers) made a counteroffer of $160,000, and left the $124,000 mortgage amount unchanged. Plaintiffs signed the counteroffer, but changed the amount of the price to be mortgaged to $128,000 (eighty percent of the agreed-upon price). The trial court found as fact that defendants saw (although they did not initial) the change made by plaintiffs, and conducted themselves in such a fashion as to indicate by their actions that the change was not a material term of the contract. I would affirm the decision of the trial court.
It is well-established contract law that the material elements of a real estate contract are the
In this regard, the trial court made the following factual findings:
[I]n determining whether there was a meeting of the minds, a court examines the visible acts of the parties. Defendants signed the petition for confirmation [of the sale in the probate court] . . . [and] the necessary probate documents for confirmation of the sale were filed . . . . All of these actions were done after defendants initially attempted to revoke the counter-offer. However, defendant Henry Cornillie [who wanted to buy the house himself] claimed he signed these papers in error as he did not know what he was signing. The Court is
not persuaded by this defendant‘s testimony as to these facts. The Court finds Henry is an intelligent man of at least average business mentality. The Court does not believe an independent businessman, such as Henry . . . would not review the documents prior to signing them. Henry signed the probate forms and will not now be heard to say he did not review them. The Court concludes the defendants’ actions evidence[d] their belief as to a meeting of the minds and their position as to a valid contract.
After a thorough review of the record, I conclude that the trial court‘s findings represent a fair interpretation of the evidence presented at trial, and so would affirm.