## Facts

- On May 16, 1975, Mr. and Mrs. Bruyere contracted to buy residential real estate from Jade Realty Corporation and paid a \$1,000 deposit.
- The purchase-and-sale agreement set an August 1, 1975 closing date and stated that the sale was “subject to financing at 7¾% for thirty (30) years.”
- The Bruyeres applied for a mortgage with Nashua Federal Savings and Loan Association, which issued a financing commitment on June 17, 1975.
- After receiving the commitment, the Bruyeres decided to separate and file for divorce.
- On June 30, 1975, Mrs. Bruyere told the lender about the impending divorce and asked to proceed as the sole borrower on the same terms.
- The lender determined that one income was insufficient to carry the mortgage and withdrew its commitment.
- The Bruyeres could not obtain alternative financing, the transaction did not close, and they demanded return of the \$1,000 deposit.
- The district court entered judgment for the Bruyeres ordering the deposit returned, and Jade Realty appealed.

## Issues

1. May buyers recover an earnest-money deposit under a financing-contingency clause when financing was initially approved but later revoked due to the buyers’ own voluntary actions (here, their decision to separate and seek a loan in only one spouse’s name)?

## Decision

- The Supreme Court of New Hampshire reversed the district court’s judgment for the Bruyeres.
- The court held the Bruyeres were not entitled to the return of the \$1,000 deposit.
- The seller’s exceptions were sustained, and judgment for the plaintiffs was set aside.

## Legal Principles

- A mortgage-financing contingency in a real-estate purchase agreement generally creates a condition precedent to the buyer’s duty to perform.
- The common purpose of such a clause is to protect a buyer from a technical breach when financing cannot be obtained based on circumstances at the time of contracting or due to a fortuitous intervening event.
- A buyer cannot use a financing contingency to avoid performance (or reclaim a deposit) when the failure of financing results from the buyer’s voluntary conduct rather than circumstances beyond the buyer’s control.
- When financing is obtained and then lost because the buyer changes the situation in a way that leads the lender to revoke the commitment, the buyer bears that risk unless the contract clearly shifts it.

## Conclusion

Because the Bruyeres obtained a mortgage commitment and later lost it only after their voluntary decision to separate and request that the loan be made to Mrs. Bruyere alone, they could not rely on the financing contingency to excuse nonperformance or recover their \$1,000 deposit, and Jade Realty was entitled to retain it.


Bruyere v. Jade Realty Corp., 375 A.2d 600 (1977)