On appeal from Superior Court, Chancery Division, Ocean County.
Antell, Brody and D'Annunzio. The opinion of the court was delivered by, Antell, P.J.A.D.
[218 NJSuper Page 102] On July 24, 1967 plaintiff agreed to lease from defendant Humble Oil & Refining Company (hereinafter referred to as
Exxon) two parcels of vacant land in Brick Township. The lease was to run from September 1, 1967 to September 30, 1986. It also granted plaintiff an option to purchase the premises for $80,000. Plaintiff's right to purchase was expressly conditioned upon its exercise of the option "at any time during the period from October 1, 1985 through January 1, 1986, by the Tenant giving to the Landlord written notice at any time during said period of its intention to exercise such purchase option. . . ."
This action for declaratory judgment and injunctive relief arises from plaintiff's failure to notify Exxon of its intention to exercise the purchase option until June 10, 1986 and Exxon's refusal to recognize the late notice as a valid exercise of the option. Plaintiff explains that its late notice was an "honest mistake" resulting from its president's reliance upon an unexecuted preliminary draft of the lease agreement. Although that document provides for the purchase option in question it does not call for the giving of notice by plaintiff as a prerequisite to the valid exercise thereof. In granting summary judgment in favor of Exxon the Chancery Division judge, noting that forgetfulness was not a basis for equitable relief, concluded that although plaintiff's mistake may have been an honest one, it was not a reasonable explanation by an experienced real estate developer for its failure to meet the clearly expressed conditions of the agreement. Plaintiff appeals.
During the term of the lease plaintiff constructed two buildings on the land and spent approximately $70,000 to reconstruct one of the buildings after a fire in April 1985. It argues that to deny it now the benefit of the purchase option would work a hardship amounting to a forfeiture which the equitable powers of the court should be exercised to prevent.
An option to purchase realty is a "binding unilateral contract whereby the owner offers to convey to the optionee at the price specified in the event the latter accepts the offer by exercising the option in strict accordance with its terms and
within the time designated." State v. New Jersey Zinc Co., 40 N.J. 560, 576 (1963). The general rules is that in an option contract, time is of the essence. Socony-Vacuum Oil Co. v. Pabian, 32 N.J. Super. 390, 394 (Ch.Div.1954); 1A Corbin, Contracts, § 273 at 593 (1963).
Cases in which equity has intervened to mitigate the hardship resulting from a tenant's failure to give timely notice occur where it is found that the tenant's delay was "slight," where it did not prejudice the landlord and where failure to grant relief would cause the tenant unconscionable hardship. Sosanie v. Pernetti Holding Corp., 115 N.J. Super. 409, 416 (Ch.Div.1971); F.B. Fountain Co. v. Stein, 97 Conn. 619, 118 A. 47 (Sup.Ct.Err.1922); Annotation, "Circumstances excusing lessee's failure to give timely notice of exercise of option to renew or extend the lease," 27 A.L.R. 4th 266 (1984). Although these principles have for the most part been applied where the option involved a lease renewal, we deem them equally pertinent to the late exercise of a purchase option. See Blumenthal v. 162 East 80th Tenants, Inc., 88 A.D. 2d 871, 451 N.Y.S. 2d 771, 772-773 (App.Div.1982).
The following statement of the Supreme Court in Dunkin' Donuts of America v. Middletown Donut Corp., 100 N.J. 166, 182 (1985) is germane:
We focus first on the contention that strict adherence to contractual remedies in the circumstances before us will impose a forfeiture on the franchisee. Although it is true that equity abhors a forfeiture, equity's jurisdiction in relieving against a forfeiture is to be exercised with caution lest it be extended to the point of ignoring legal rights. [Citations omitted]. Thus if parties choose to contract for a forfeiture, a court of equity will not interfere with that contract term in the absence of fraud, accident, surprise, or improper practice. [Citations omitted].
We are presented here not with a "slight" delay, but one which extended almost five and a half months beyond the expiration of the three month period limited for the giving of notice. The maxim has long been recognized that equity aids the ...