Patel v. McGrath

SUPREME COURT CASES

Laws-info.com » Cases » Illinois » 2nd District Appellate » 2007 » Patel v. McGrath

Patel v. McGrath

State: Illinois

Court: 2nd District Appellate

Docket No: 2-06-0472 Rel

Case Date: 06/29/2007

Preview:No. 2--06--0472 ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS SECOND DISTRICT ______________________________________________________________________________ PRANAV PATEL and JYOTIKA PATEL, ) Appeal from the Circuit Court ) of Du Page County. Plaintiffs-Appellants, ) ) v. ) No. 06--CH--511 ) VALERIE McGRATH and HARRIS BANK ) HINSDALE, N.A., ) Honorable ) Bonnie M. Wheaton, Defendants-Appellees. ) Judge, Presiding. ______________________________________________________________________________ JUSTICE O'MALLEY delivered the opinion of the court: The plaintiffs, Pranav and Jyotika Patel, appeal the dismissal of their complaint filed against Valerie McGrath and Harris Bank Hinsdale, N.A. (collectively, McGrath), seeking specific performance of a real estate contract. They argue that a letter they sent under an attorney-approval clause was not a counteroffer and that there was an issue of material fact whether, in violation of that clause, McGrath's attorney disapproved the contract based solely on the purchase price. We determine that the letter, which specifically stated that it was not to be construed as a counteroffer or a revocation, was what it said it was, i.e., not a counteroffer or a revocation. We further determine that there was an issue of material fact whether the contract was later rejected based solely on the purchase price. We reverse and remand. I. BACKGROUND

No. 2--06--0472 On March 11, 2006, McGrath accepted the Patels' offer to buy real estate in Burr Ridge, Illinois. The contract contained an attorney approval clause that provided: "Attorney Review: The respective attorneys for the Parties may approve, disapprove, or make modifications to this Contract, other than stated Purchase Price, within five (5) business days after the Date of Acceptance. Disapproval or modification of this Contract shall not be based solely upon stated Purchase Price. Any notice of disapproval or proposed modifications(s) by any Party shall be in writing. If within ten (10) business days after the date of Acceptance written agreement on proposed modifications(s) cannot be reached by the Parties, this Contract shall be null and void and earnest money refunded to Buyer upon written direction of the Parties to Escrowee. If written notice is not served within the time specified, this provision shall be deemed waived by the Parties and this Contract shall remain in full force and effect." Within five business days, the Patels' attorney sent a letter to McGrath's attorney, requesting modifications to the contract that would: (1) require the seller to furnish a survey in not less than five business days before closing, instead of one business day; (2) allow the buyer to terminate the contract and receive a refund of all earnest money in the event of problems with title or title insurance; and (3) add that the seller warranted that there was no senior citizen exemption or freeze associated with the property and that, if one existed, it would not be considered in the proration of real estate taxes. The letter further stated: "Please be advised that the above modifications should not be construed as a revocation of the current Contract, nor should they be construed as a counter-offer. Should

-2-

No. 2--06--0472 the foregoing be acceptable, kindly have Sellers sign, or sign on their behalf, in the space provided below and return an executed copy to my attention." That same day, McGrath's attorney sent a letter rejecting the modifications and disapproving the contract. The letter did not give any explanation for the rejection. The property was then relisted at a price of $1,800,000. The original listing sought $1,299,900. The next day, the Patels' attorney sent a letter accepting the rejection of the Patels' proposed modifications and demanding specific performance of the contract. The Patels filed a complaint seeking specific performance of the contract. They also filed a motion seeking a temporary restraining order and preliminary injunction. McGrath moved to dismiss, arguing that the letter from the Patels' attorney rejected the contract and that her attorney properly disapproved the contract within the review period. The trial court treated the motion as a motion to dismiss under section 2--619 of the Code of Civil Procedure (735 ILCS 5/2--619 (West 2004)). It noted that the proposed modifications did not concern price and found that, regardless of how it was described, the letter from the Patels' attorney constituted a counteroffer that was not accepted by McGrath. Thus, the court dismissed the complaint with prejudice and denied the motion seeking a temporary restraining order and injunction. The Patels appeal. II. ANALYSIS The Patels argue that: (1) the correspondence from their attorney was neither a counteroffer nor a rejection of the contract, and (2) there was an issue of material fact whether McGrath's attorney's disapproval of the contract was based solely on the purchase price.

-3-

No. 2--06--0472 Where a cause of action has been dismissed under section 2--619, the questions on appeal are whether a genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. Doe v. Dimovski, 336 Ill. App. 3d 292, 295 (2003). Interpretation of contract language is a question of law, which we review de novo. Radkiewicz v. Radkiewicz, 353 Ill. App. 3d 251, 256 (2004). The Patels analyze the effect of the attorney-approval clause by contending that a contract was formed and that the letter from their attorney (pursuant to the attorney-approval clause) invited discussion or clarification of terms instead of rejecting the contract by making a counteroffer. McGrath contends that the correspondence was a counteroffer that rejected the contract. The parties agree that they entered into a contract; their disagreement is over the effect of the attorney-approval clause, specifically, what action under the clause will negate the contract. We agree that the parties entered into a valid contract and we reject those cases holding that this type of attorney-approval clause renders the contract illusory. It has been held that a contract containing an attorney-approval clause should be construed as a qualified or conditional acceptance of the terms of that contract. Groshek v. Frainey, 274 Ill. App. 3d 566, 570 (1995); see Anand v. Marple, 167 Ill. App. 3d 918, 920 (1988). Normally, invocation of the attorney-approval clause triggers a rejection of the contract and, at times, a counteroffer. Groshek, 274 Ill. App. 3d at 570. For example, we have held that a letter by an attorney, which did not accept the terms of the contract and proposed modifications, both rejected the contract and became a counteroffer. Olympic Restaurant Corp. v. Bank of Wheaton, 251 Ill. App. 3d 594, 599 (1993).

-4-

No. 2--06--0472 Here, contrary to Groshek and similar cases, we hold that, pursuant to the reasoning of Hubble v. O'Connor, 291 Ill. App. 3d 974, 980-81 (1997), a contract was formed. McGrath accepted the Patels' offer. Upon that acceptance, a contract was formed. The attorney-approval clause did not render the offer, the acceptance, or the consideration supporting the contract formation in this case illusory; instead, it constituted a condition subsequent within the offer, allowing the parties to do one of three things: "[(1)] approve, [(2)] disapprove, or [(3)] make1 modifications to" the contract. See Hubble, 291 Ill. App. 3d at 979 (attorney-approval clause constitutes condition subsequent within offer). It further provided that, "[i]f within ten (10) business days after the date of [a]cceptance[,] written agreement on proposed modification(s) cannot be reached by the [p]arties, this [c]ontract shall be null and void." Based on this language, the parties, on advice of their attorneys, could do one of three things: approve the contract, disapprove the contract, or suggest modifications. If modifications were suggested, then the parties had 10 days in which to come to agreement or else the contract would become void. We note that this is effectively McGrath's position. McGrath argues that the Patels' March 22, 2006, letter accepting her rejection of the proposed modifications and demanding specific performance of the contract was late under the attorney-approval clause. The Patels counter, noting that they tried to communicate with McGrath in a timely fashion but got no response. The Patels argue that, anyway, McGrath's rejection letter precluded their acceptance of the rejection because it wrongfully disapproved of the contract. We agree with the Patels, and we will discuss the effect of McGrath's alleged wrongful disapproval below.

1

Rather than "make," the better term is propose or suggest. -5-

No. 2--06--0472 We next examine the effect of the parties' correspondence. The Patels' first letter proposed modifications and stated that it was not to be considered a revocation of the contract or a counteroffer. "[S]imply because a communication discusses the possibility of modification does not necessarily mean that the communication is a demand for modification." Hubble, 291 Ill. App. 3d at 980. This idea is reflected in the Restatement (Second) of Contracts, which states: "A mere inquiry regarding the possibility of different terms, a request for a better offer, or a comment upon the terms of the offer, is ordinarily not a counter-offer. Such responses to an offer may be too tentative or indefinite to be offers of any kind; or they may deal with new matters rather than a substitution for the original offer; or their language may manifest an intention to keep the original offer under consideration." Restatement (Second) of Contracts

Download Patel v. McGrath.pdf