What You Need to Know

• Courts will enforce good faith obligations even when contracts allow termination. The seller couldn't suddenly terminate after allowing the buyer to spend nearly seven years and considerable resources pursuing municipal approvals with the seller's knowledge and support.
• Actions can waive contractual rights and create estoppel. By permitting Oclar to continue working past deadlines without objection—and even supporting their efforts—AVC waived its right to terminate based on timing failures and was estopped from claiming breach.
• Specific performance can be ordered even before all contingencies are met. The court granted specific performance despite the Planning Board's approval still being pending, withholding final judgment until the approval was actually obtained.
• Original contract prices will be enforced without proof of appreciation. AVC could not increase the purchase price based on property appreciation over the seven-year delay because they provided no evidence of increased value, despite the lengthy timeline.
• Parties cannot object to settlement terms they previously endorsed. Since AVC was aware of and did not object to the negotiated changes Oclar made with the Planning Board over six years, they were barred from objecting to those terms at the final hearing.

Introduction

In a recent decision, the New Jersey Appellate Division affirmed the trial court’s decision invoking the doctrines of implied duty of good faith and fair dealing, waiver, and estoppel to order specific performance compelling the sale of a property even if it took nearly seven years for the buyer to get to the point of obtaining the approval from the municipality’s Planning Board for future development that was a contingency of the sale. Oclar Prop. LLC v. Atl. View Cemetery Assn. Inc., No. A-0834-23, 2023 N.J. Super. Unpub. LEXIS 746 (App. Div. May 6, 2025).

Facts

In 2014, the plaintiff-respondent, Oclar Properties, LLC (“Oclar”), and the defendant-appellant Atlantic View Cemetery Association, Inc. (“AVC”) entered into a contract that AVC would sell a portion of its cemetery property to Oclar to build and sell five single-family residences in Manasquan Borough and Wall Township. The purchase price was $1,125,000. The agreement had two critical contingencies: first, AVC had to secure the approval of the New Jersey Cemetery Board (“Cemetery Board”) to sell the property and second, Oclar had to obtain subdivision approval from the Planning Board of the Borough of Manasquan (“Planning Board”). Paragraphs 5(B) and 5(C) of the agreement explain the timeline of the contract and what would happen in the event either party did not obtain the necessary approval:

The Buyer shall have three [] months from the date Seller gives Buyer written notice that it has received . . .[Cemetery Board] Approval, to obtain the Development Approval. The Buyer shall be permitted two [] extensions of two [] months each to obtain the Development  Approval upon written request to the Seller received by the Seller not later than ten [] days prior to the expiration of the initial or  extended Development Approval contingency  period, provided, however, that the Buyer demonstrates to the reasonable satisfaction of the Seller that it is diligently pursuing the Approval . . .

In the event the Buyer or the Seller has not obtained the approvals within the contingency periods set forth above, or any agreed upon extension thereof, either Buyer or Seller may terminate this Agreement.

On September 23, 2014, AVC obtained permission from the Cemetery Board. From 2014 through 2021, Oclar spent considerable resources attempting to obtain Planning Board approval, including filing a prerogative writ action. All of this was done with AVC’s express consent to continue past the time specified from the contract. In fact, during hearings and negotiations over this period, AVC permitted Oclar to negotiate on its behalf and was notified of all changes. In March 2021, Oclar and the Planning Board created a term sheet outlining agreed-upon terms for which the record reflects that a deal likely would have been completed in a final hearing. AVC, however, decided to terminate the agreement under paragraph 5(C) in November 2020, months before this final hearing, for the stated reason that Oclar had failed to obtain permission from the Planning Board.

The Trial Court Decision

On June 8, 2021, Oclar filed a complaint against AVC, alleging breach of contract and breach of the covenant of good faith and fair dealing. Oclar sought specific performance from AVC to sell the property. On September 20, 2023, after a six-day bench trial, the trial court held in Oclar’s favor, enforcing the agreement and granting specific performance as a remedy. The ruling also forbade AVC from objecting to terms it had already endorsed during past negotiations at the upcoming final hearing. AVC appealed.

The Appellate Decision

The Appellate Division affirmed the decision of the trial court in its entirety.

On appeal, AVC first argued that because there was no time by which they had to serve a termination notice to Oclar under paragraph 5(C), they could terminate the agreement at any time. However, the Court held that AVC’s decision to allow Oclar to litigate for nearly seven years past the expiration date set forth in 5(C) at considerable cost to Oclar, only to terminate the contract months before an agreement was potentially reached, was in bad faith and a breach of contract and of the implied duty of good faith and fair dealing.

Specifically, the Court found that AVC waived its right to terminate the contract and was estopped from asserting failure to obtain approval as the basis for termination due to its allowing Oclar to work for years to obtain Planning Board approval without complaint and actually supporting its efforts. In fact, the Court noted that “[t]he record … supported the trial court's finding that AVC ‘calculated that they could make a larger profit if they simply canceled this contract’ and not because Oclar had failed to obtain the necessary approvals.”

AVC also argued that specific performance was not available as a remedy to force the sale because the contract was contingent on third party approval. In that context, while the Planning Board’s approval was not final, a tentative settlement had been reached that would have provided for approval. Relying on Gulf Oil Corp. v. Montanaro, the Court held that specific performance could still be entered, albeit with entry of judgment withheld until the Planning Board actually issued approval of the subdivision. 94 N.J. Super. 348, 353 (Ch. Div. 1967).

AVC additionally asked that the price of the ordered sale be increased due to appreciation of the property over the years. However, the Court ruled that because AVC provided no proof that the property was now worth more than the number the parties agreed to, AVC was not entitled to more money from the sale despite the years it took to get to a potential closing. The Court also noted that the parties had previously agreed to a price increase of  $50,000 based on improvements, which further undercut AVC’s argument.

Finally, AVC took issue with the ruling that held they could not object to the terms that Oclar negotiated to gain final approval from the Planning Board before the upcoming final hearing. AVC argued that these changes were unwritten and unsigned changes to the original agreement and that they should therefore be able to object to these terms at the hearing. The Court dismissed this argument and found the changes were negotiated in good faith by Oclar to try and move the deal forward over six years, and AVC was aware of these negotiations and did not object when they occurred.

Takeaway

The Court’s decision in this case to order specific performance before the Planning Board approved the sale was an example of a proper use of the Court’s discretion to obtain an equitable resolution relying principally on the doctrines of waiver and estoppel. This ruling avoided waste and an unjust result considering the seven years of resources Oclar invested in obtaining Planning Board approval, all with AVC’s endorsement. Finally, the decision is a reminder that when seeking damages related to the value of real estate, proper proof is essential. Had AVC put on any proof of the property’s appreciation, the purchase price on the Court-ordered sale may have been increased.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Matthews Florez at mflorez@riker.com or Shelley Wu at swu@riker.com. We acknowledge our Summer Associate Noah Wilk, University of Maryland School of Law, for his valuable contribution to this post.