Real Estate Contracts

Patel v McGrath, 374 Ill App 3d 378, 872 NE2d 537, 313 Ill Dec 554 (2nd D 2007).

Facts: Valerie McGrath listed property for sale at $1,299,900. Pranav and Jyotika Patel offered to purchase that property, and McGrath accepted their offer. The parties' contract contained a clause providing that the parties' attorneys could review the contract and approve, disapprove, or modify it within five days of acceptance. In addition, it declared that if the parties could not agree on any proposed changes within ten days of acceptance, then the contract would be void. Finally, the contract specifically stated that neither disapproval nor modification could be based solely on the property purchase price.

Within five business days of acceptance, the Patels' attorney proposed contract modifications. The letter containing the suggestions stated that McGrath should not construe the proposed changes as a counteroffer or a revocation of the current contract. McGrath's attorney immediately rejected the modifications and disapproved the contract, without giving a reason for the disapproval. Subsequently, McGrath re-listed the property at $1,800,000. The next day, the Patels accepted McGrath's rejections of the proposed modifications and demanded specific performance of the contract.

The Patels then filed suit, seeking a temporary restraining order, preliminary injunction, and specific performance of the contract. The trial court dismissed their complaint, finding that the Patels' proposed modifications constituted a counteroffer that McGrath rejected.

Holding: Reversed and remanded. The proposed modifications were neither a counteroffer nor a revocation of the agreement. The parties had already entered into a valid contract at the time the Patels proposed the changes. Although that contract contained an attorney approval clause, the clause served as a condition subsequent within the offer rather than a conditional acceptance of the offer. It allowed either party to entirely disapprove the agreement on grounds other than purchase price or to discuss modifications without making a counteroffer that would constitute a repudiation of the original agreement. The Patels explicitly stated in their letter containing proposed modifications that they were not disapproving the contract but merely suggesting changes. Subsequently, the Patels accepted McGrath's rejection of their proposed modifications. Thus, the original contract remains valid.

In addition, McGrath may have violated the terms of the attorney approval clause because she may have disapproved the contract simply based on the purchase price of the property. She gave no reason for the disapproval and re-listed the property at a much higher price. Therefore, more facts are necessary to determine whether McGrath disapproved the contract for proper reasons.

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