Robert Hiatt, Et. Al. V. Jack L Giles, Et. Al.

Headnotes

H1: Contract Law > General Overview

The legal definition of the word “contract” includes every description or agreement or obligation, whether verbal or written, whereby one party becomes bound to another to pay a sum of money or to perform or omit to do a certain act. 

H2: Contract Law > Formation of Contractions > General Overview

A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the in some way recognizes a duty. 

H3: Contracts Law > Formation of Contracts > Offers > General Overview

To form a contract, mutual assent must be present in the exchange. Mutual assents requires each party to make a promise or begin or render a performance. Mutual assent is manifested by offer and acceptance. 

H4: Contracts Law > Formation of Contracts > Offer > General Overview

An offer is the overt willingness to enter into a bargain, so as to indicate to the other party that an assent to bargain is invited and will consummate a contract. 

H5: Contracts Law > Formation of Contracts > Consideration > General Overview

Valuable consideration may be a detriment to the promise or a benefit to the promisor. The court does not consider the adequacy of consideration given, except in claims for fraud or unfair treatment. 

H6: Contracts Law > Contract Interpretation > Parol Evidence > General Overview

The parol evidence rule protects the written contract by prohibiting evidence that may endanger the stability, predictability, and enforceability of the interpretation of written contracts. 

H7: Contracts Law > Contract Interpretation > Parol Evidence > General Overview

The parol evidence rule dictates that absent fraud, mistake, or other invalidating cause, the parties’ final written agreement may not be contradicted or supplemented by testimony that describes the circumstances of the agreement or of any testimony that describes any prior or contemporaneous agreements, whether written or oral. 

Summary of Case

Procedural Posture: Plaintiffs filed a complaint alleging breach of contract and claiming damages in the sale of their residence to Defendants. Defendants claim that the contract was contingent on certain factors, and because those factors were not met and there was not adequate consideration on one of the notes, the contract is not enforceable. 

Overview:  Plaintiffs Robert and Angela Hiatt owned a residence that they decided to sell, due to changes in employment. The plaintiffs decided to sell their home without a realtor. The plaintiffs were contacted by Defendants Jack Giles and Joan Donnelly about purchasing the resident. The defendants had substandard credit ratings and had to go through a private company that specialized in mortgage loans to people and businesses with poor credit ratings.

The Mortgage Company originally approved Defendants for a loan of $225,000, which was contingent on the appraisal of the property. After receiving the appraisal the Mortgage Company lowered their loan offer to the Defendants to $200,000. Additionally, Defendants and Plaintiffs agreed that the Plaintiffs would hold a cognovits note for $14,000 that was payable by the Defendants for the purchase of the home.

Anticipating a speedy closing, the Plaintiffs moved into an apartment. However, Defendants failed to close their loan due to lender dissatisfaction and the transaction between the Plaintiffs and Defendants was not completed. The plaintiffs eventually sold the residence for $200,000. Plaintiffs are now asking for damages related to the cost of the apartment (including duplicate utility expenses), storage costs, mortgage-related costs, and other expenses related to the Defendants. 

Outcome: The Court found that the contract was not contingent on the Defendant’s ability to secure financing, but instead the contract was worded to put an affirmative obligation on the Defendants to secure financing. Therefore, the Defendants breached the contract with the Plaintiffs. Plaintiffs may recover $14,135 in the amount of the cognovits note and $135 in attorney fees, plus any court costs and interest based on the statutory rate.

The case was reversed and the decision was vacated by the Appellate Court. Appellate Opinion may be read here.