Brief Fact Summary. Sellers (Plaintiffs) brought this suit against the Hensels (Defendants) to secure $1,000.00 earnest money deposit required by the contract. Defendants appeal from a judgment entered in favor of the Plaintiffs.
Synopsis of Rule of Law. Financing clauses in contracts impose on buyers an implied obligation to make a reasonable and good faith effort to satisfy the conditions.
We believe the better view to be that such subject to financing clauses impose upon the buyers an implied obligation to make a reasonable and good faith effort to satisfy the condition.View Full Point of Law
Issue. Whether the court properly determined that the Defendants were not excused from performing?
Held. Yes. Judgment is affirmed.
Financing clauses upon which a contract is contingent imposes an obligation on the buyer to make a reasonable and good faith effort to satisfy the condition. This concept relies on the contract law principle that a promisor cannot rely on the existence of a condition precedent to excuse performance where the promisor prevents performance of the condition.
Here, the condition was that the buyer be able to secure the financing necessary to mortgage the property. The Plaintiffs satisfied their burden of proving that the Defendants did not make a reasonable and good faith effort to secure the necessary financing.
Discussion. A breach of prevention, hindrance or failure to cooperate is bad faith under the general duty of good faith and fair dealing in the performance of a contract. The duty of good faith is intended to protect the interests of the parties. However, a duty to cooperate, in other words to take affirmative action, will not be imposed in every case, whether it is imposed depends on the facts surrounding the case.