Thor properties v. Willspring Holdings LCC

FACTS

Plaintiff Thor Properties brought this action for breach of contract to compel specific performance by defendant Willspring Holdings to sell it a mixed-used building in Manhattan. On December 5, 2012, Thor emailed Willspring a letter of intent (LOl) offering to buy the property for $111 million under terms that included Willspring's transfer of the property free of liens. The December 5 L01 also provided that, unless Willspring countersigned and returned it by December 7, Thor's offer would "be deemed withdrawn in its entirety:' On December 5, Willspring emailed Thor to reject its offer, noting that Thor's purchase price fell short of other bids. Willspring also refused to transfer the property free of liens, because it demanded Thor assume the existing mortgage on the property. After more negotiations, on December 6 Willspring emailed Thor that Willspring expected a modified L01 to be issued under which Thor would (1) increase its offer to $115 million; (2) agree to assume the mortgage; (3) execute a long-form purchase agreement by December 11, 2012; and (4) close by the end of the year. Later on December 6, Thor emailed a second LOl, which increased the purchase price but did not commit Thor to execute the purchase agreement by December 11 or close in 2012 and still required Willspring to deliver the property free ofliens. The new L01 also required Willspring's countersignature and delivery by December 7. Thereafter, Willspring responded by sending Thor a copy of its December 6th LOr, which Willspring had marked up by hand and signed. Willspring's response deleted Thor's requirement that the seller convey title free of liens and added the December 11 deadline for an executed purchase agreement. In addition, Willspring's response modified its demand for a closing by year's end by providing that the closing must occur within 30 days after the purchase agreement was signed, but also provided that time was of the essence for closing. 186 PART III Contracts Minutes later, Willspring's principal emailed Thor that he was "pleased that we have been able to agree [to] terms:' He cautioned, however, that if there were any renegotiating, Wellspring would "walk away promptly." About one hour thereafter, Thor emailed Willspring that "[w]e will be getting our response to your proposed changes to the LOr shortly:' While the parties continued discussions on the evening of December 6, on the morning of December 7 Willspring's principal emailed Thor as follows: "Per our conversation last night ... I understand our changes to the December 6th LOr are NOT acceptable to Thor as presented. Please send me a revised LOr with your suggested changes so I can have our attorney review them:' Later on December 7, Thor sent Willspring a new LOr which changed the terms of the marked-up December 6th Lor by giving Thor a unilateral right to adjourn the closing date by 10 days, despite time being of the essence. The December 7th LOr sent by Thor also extended the deadline for a signed purchase agreement by two days, but made Thor's assumption of the mortgage the only allowable exception to Willspring's obligation to deliver the property free of liens. The December 7 LOr stated that it required Willspring's countersignature and return by the end of that day. On the afternoon of December 7, Willspring's principal emailed Thor that the "LOr changes you have put forth ... [are] not what we agreed to" because "[w]e were very clear on the need to sign a contract early next week and ... to close by year end:' The Willspring principal acknowledged that Thor's offer expired that day. On December 10, Thor emailed Willspring a copy of the December 6th Lor that Willspring had marked up and signed, which now bore Thor's initials next to Willspring's handwritten changes .-This purported to show Thor's acceptance of the agreement that it had previously sought to modify. Willspring, however, contracted to sell its property to a third party. The Supreme Court for New York County granted Willspring's motion for summary judgment dismissing the complaint. Thor appealed.

DECISION

Judgment for Willspring affirmed.

OPINION

If the offeree responds by conditioning acceptance on new or modified terms, that response constitutes both a rejection and a counteroffer, The counteroffer extinguishes the original offer, and thereafter the offeree cannot unilaterally revive the offer by accepting it, as Thor attempted to do on December 10. While oral acceptance of a written offer can form a binding contract for the sale of real property, the record did not support Thor's claim that it unequivocally accepted the counteroffer that Wellspring set forth in the markup of the December 6th LOI, before that counteroffer terminated. Thor's email that it would respond to Willspring's changes to the December 6th Lor indicates that Thor had not accepted those changes and intended further negotiation. Moreover, Willspring's email from the morning of December 7 confirmed that Thor had rejected Willspring's counteroffer. At the time, Thor did not claim that an agreement had been reached, but instead responded to Willspring's email by submitting the December 7th LOI, which is described as another "offer:' Thor claims that on December 6 it orally accepted Willspring's changes to the December 6 LOI, but asked Willspring to consider some "slight modifications" that Thor would put into writing the next day. However, the changes in the , December 7 Loi were not, as Thor claims, "immaterial' By modifying a material term in Willspring's counteroffer, Thor rejected it and proposed its own counteroffer, which Willspring never accepted. Accordingly, the complaint for breach of contract was properly dismissed.

INTERPRETATION: A counteroffer generally operates as a rejection and thus terminates the power of acceptance.

ETHICAL QUESTION: Was the defendant morally obligated to sell the property? Explain.