(1) the application of N.J.S.A. 56:12, the "Plain Language Act" (Act) to a broker-prepared agreement of the sale of residential real estate;
(2) requirements concerning the use of the "attorney review clause" in that agreement; and
(3) whether the preparation of the agreement constituted the practice of law, inviting civil penalties.
The defendants Myung Sook Suh and In Sook Suh (Buyers) agreed to purchase a single family dwelling from James J. Wheatly and Charlotte L. Wheatly (Sellers) for $128,900. The agreement, dated February 7, 1984, consisted of a printed form prepared by Maffucci Realty Inc., a broker, with blanks that were completed by Maffucci. It required Sellers to pay a commission of $7,734 to Maffucci and a cooperating broker, U.S.A. Today (Brokers), to be divided equally. It also contained
a clause that the Buyers interpreted as permitting cancellation of the agreement, if an appraisal showed the property to be worth less than the purchase price. They cancelled the agreement in reliance on this clause when they received an appraisal reflecting a value of only $115,400.
Sellers then sued the Buyers for $10,000, the amount of the latter's deposit, which was to "be paid to Seller as liquidated damages or to be applied on account of purchase price . . . in the event of the buyer not making settlement in accordance with the terms" of the agreement. Maffucci and U.S.A. Today brought separate suits against Buyers for the recovery of their commissions. Buyers counterclaimed for the return of their deposit and for damages, both compensatory and punitive. The suits were consolidated and all parties have moved for summary judgment. No material facts are in dispute. This opinion decides the motions in favor of Buyers, terminating the litigation.
A. Violations of the Plain Language Act
The agreement of sale contained a mortgage contingency clause upon which Buyers relied in cancelling the agreement. They now argue, correctly, that this clause violates the Plain Language Act. The clause, a printed portion of the agreement with filled-in blanks, is reproduced as follows:
5. This Agreement is contingent upon mortgage financing as follows:
(a) Amount of mortgage loan required by Buyer: $98,900.
(b) Type Conventional, at the prevailing rate of interest.
(c) Commitment date for the approval of the mortgage: March 14, 1984
(d) Maximum mortgage placement fee, if any, to be paid by Seller:
(e) Minimum amount of appraisal required, if FHA financing:
(f) Mortgage loan application shall be made as provided herein and if said mortgage loan cannot be obtained, then deposit monies paid hereunder shall be returned to the Buyer and this Agreement shall be void and of no effect: otherwise, if the Buyer or Maffucci Realty Inc. is able to secure the said mortgage, this Agreement shall remain in full force and effect.
(g) Buyer shall make written applications for said mortgage within 7 days of Sellers execution hereof and shall give prompt and full cooperation in obtaining same. Should Buyer fail to make said applications, then Seller may
declare this Agreement null and void and all deposit monies shall be returned to Buyer. If Buyer or Buyer's Agent does not advise Seller or Seller's Agent of receipt of a mortgage commitment acceptable to Buyer on or before the date specified in subparagraph (c) above, then Seller (but not Buyer) shall have the option thereafter and until, but not beyond, the date of receipt of an acceptable commitment, to declare this Agreement null and void by notice in writing to Buyer or His Agent of his election to cancel and all deposit monies shall be returned to Buyer.
(h) It is expressly agreed that notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the seller has delivered to the purchaser a written statement issued by the Federal Housing Commission setting forth the appraised value of the property (excluding closing costs), which statement the seller hereby agrees to deliver to the purchaser promptly after such appraised value statement is made available to the seller. The purchaser shall, however, have the privilege and option of proceeding with the consummation of the contract without regard to the amount of the appraised valuation made by the Federal Housing Commissioner. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure. HUD does not warrant the value or the condition of the property. The purchaser should satisfy himself/herself that the price and condition of the property are acceptable. It is expressly agreed that, notwithstanding any other provisions of the contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described therein, if the contract price or cost exceeds the reasonable value of the property established by the Veterans Administration. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the reasonable value established by the Veterans Administration.
(i) Seller agrees to permit inspections by authorized appraisers and provide certifications as required to obtain FHA-VA financing.
The agreement was a "consumer contract," defined in N.J.S.A. 56:12-1 as "a written agreement in which an individual . . . purchases real . . . property." Its form was not approved by the Attorney General as permitted by the Act. [§ 8] It was required to "be written in a simple, clear, understandable and easily readable way." [§ 2] The Act sets forth Guidelines, consisting of examples and directions which a court "may" consider in determining whether a consumer contract as a whole complies with its provisions, namely:
(a)(1) Cross references that are confusing;
(2) Sentences that are of greater length than necessary;
(3) Sentences that contain double negatives and exceptions to exceptions;
(4) Sentences and sections that are in a confusing or ...