Washington Properties, Inc. v. Chin, Inc.

760 A.2d 546 (2000)

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Nature of the Case

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Facts

P granted D an eight-year option to purchase certain real property in exchange for D's payment to P of an option fee in annual installments of $20,000 upon execution of the contract and $10,000 on the first, second, and third anniversary dates of the execution of the contract. The contract provided that time was of the essence of the agreement. D made the initial $20,000 payment but balked at making the subsequent payments when they came due on the ground that P had been unable to obtain the consent of its mortgage lender to be bound by the terms of the option agreement. D relied on Section 12 of the contract, which reads: 12. P shall obtain the consent of the current noteholder of the deed of trust of the Property to be bound by the terms of this Agreement. P sued D for breach. D's president testified that Section 12 was to ensure that D's option would survive for a full eight years regardless of any foreclosure in the interim. No foreclosure had occurred or was threatened when D withheld its option payments. , further payments would have increased the dollar amount of WPI's investment at risk in the event of a foreclosure. D claims the commercially reasonable and intended interpretation of Section 12 was that the lender's consent had to be obtained before further payments were due and as a condition precedent to D's obligation to make such payments. The trial court concluded that P's inability to obtain its lender's consent did not excuse D from making option payments when they were due; that D's failure to make those payments constituted a material breach of the contract; and that D's breach entitled P to terminate D's option. D appealed.