Nov. 30, 2009 – A contract to buy a home conditioned on the seller’s “obtaining” another residence “of their choice” was not unenforceable on theories of indefinite terms or illusory promises when considered in the context of its formation.
In Vohs v. Donovan, 2009AP507, the Wisconsin Court of Appeals explained today that a term is definite when a court can objectively find the parties’ mutual assent through both the contract text and its surrounding circumstances. A promise to perform is illusory when the court finds its fulfillment is “conditional on some fact or event that is wholly under the promisor’s control and his [or her] bringing it about is left wholly to his [or her] own will and discretion,” the court continued.
Paul and Teresa Donovan agreed to buy the home of Terry and Vicki Vohs on the contingency of the Vohses obtaining a desired property in the following two days. According to their unrebutted submission to the court, the Vohses had a pending counteroffer to purchase another home that expired within that time.
The Vohses’ counteroffer was timely accepted and the Vohses’ broker informed the Donovans of this. Yet, the Donovans did not follow through on the purchase of the Vohses’ home, which later sold to a different buyer for less money.
In response to the Vohses’ lawsuit charging the Donovans with breach, the Donovans successfully sought summary judgment on the grounds that the contract could not be enforced with its indefinite and illusory contingency. The Vohses appealed the circuit court decision.
In an opinion authored by Judge Margaret Vergeront, the court of appeals said that the Vohses’ success in obtaining a home of their choice was a condition precedent that may not have specifically mentioned the Vohses’ contemporaneous effort to buy another property, but reasonably implied it.
“It is illogical to infer that the Vohses are asking for two days to find a house of their choice and complete the transaction to ‘obtain’ it,” the court wrote. The court noted that the Donovans submitted nothing to dispute that the transaction was premised on the Vohses’ pending counteroffer, leading to a reasonable inference that the Donovans knew of it.
Turning to the Donovans’ objection that the word “obtain” could refer to merely a completed closing or physical occupancy of the residence, the court said that a term’s ambiguity does not make it indefinite. Whereas an ambiguous term is reasonably susceptible to more than one construction, an indefinite term lends itself to no reasonable construction, even after considering the surrounding circumstances, the court explained.
The Donovans argued that “home of their choice” is indefinite because it could mean whatever the Vohses wanted it to mean, citing Nodolf v. Nelson, 103 Wis. 2d 656 (Ct. App. 1981). In Nodolf, the court would not enforce a contract from which it could not determine the terms of financing that the buyer had to secure before becoming obliged to perform.
Distinguishing Nodolf from this case, the court of appeals remarked that its analysis in Nodolf did not consider whether the clause in question implied a reference to circumstances that better defined the condition. Also, the court said that there was no extrinsic evidence in Nodolf to suggest that the parties shared the same definite understanding of the contingency as in this case.
Because the contract specified a two-day period in which the Vohses were expected to obtain a new home and the extrinsic evidence showed a counteroffer good within that duration, the court said the clause could not be reasonably characterized as illusory.
“[T]here is a reasonable inference that whether the Vohses’ counteroffer will be accepted by the deadline is not ‘wholly under [their] control] or ‘left wholly to [their] own will and discretion,’” the court wrote.
The court of appeals reversed the circuit court's summary judgment order in favor of the Donovans and remanded the case for further proceedings.
Alex De Grand is the legal writer for the State Bar of Wisconsin.