## Facts

- Louis S. Racicot, Jr., owned the Linwood Mill, a commercial property in Northbridge and Uxbridge, Massachusetts.
- Racicot’s corporation leased space to The Maiden Merchant International Incorporated, whose chair and CEO was Deborah Kay Neumann.
- The lease and a related right of first refusal in favor of Neumann were executed under seal.
- Neumann and her company did not pay rent, but Neumann provided unpaid services to Racicot in connection with the property and his business needs.
- After Racicot’s death, the executrix (Joan Racicot) entered into a purchase and sale agreement to sell the Linwood Mill to James M. Knott, Sr.
- Neumann invoked her right of first refusal to purchase on the same terms, and Knott sued seeking specific performance of his agreement, attacking the right of first refusal as unsupported by consideration and otherwise defective.

## Issues

1. Whether Massachusetts should eliminate the common-law rule that a seal conclusively supplies consideration for an option contract, including a right of first refusal.
2. If the rule is changed, whether the change applies retroactively to invalidate Neumann’s right of first refusal and alter the specific-performance judgment.
3. Whether Knott was entitled to postjudgment relief under Mass. R. Civ. P. 60(b)(2) or 60(b)(3) based on newly discovered evidence or fraud.
4. Whether the trial court erred in rejecting contempt-related and appellate-record arguments.

## Decision

- The Supreme Judicial Court affirmed the judgment enforcing Neumann’s right of first refusal and denying Knott’s requested relief.
- The court rejected, for option contracts, the conclusive presumption that a seal alone imports consideration, and adopted Restatement (Second) of Contracts § 87(1) as the governing standard.
- The court declined to apply the change retroactively in a way that would upset existing contractual expectations.
- The court concluded that, in any event, the right of first refusal satisfied § 87(1)’s requirements and remained enforceable.
- The court held Knott did not meet the demanding standards for relief under Rule 60(b)(2) or 60(b)(3).
- The court found no reversible error in the handling of the contempt complaint or in the refusal to alter the appellate record.

## Legal Principles

- In Massachusetts, an option contract (including a right of first refusal) is not enforceable merely because it is under seal; enforceability is assessed under Restatement (Second) of Contracts § 87(1).
- Under § 87(1), an offer is binding as an option contract if it is in writing, signed by the offeror, recites purported consideration, and proposes an exchange on fair terms within a reasonable time, or is made irrevocable by statute.
- A common-law change may be applied prospectively where retroactive application would disrupt settled contract rights and commercial expectations.
- Relief under Mass. R. Civ. P. 60(b)(2) requires a showing that the evidence could not have been discovered earlier with due diligence; relief under 60(b)(3) requires proof of serious fraud aimed at corrupting the judicial process, not mere accusations.
- A party’s failure to request an evidentiary hearing at the relevant time weakens later claims of error based on the absence of a hearing, and trial courts have discretion over the contents of the appellate record.

## Conclusion

The Supreme Judicial Court modernized Massachusetts option-contract doctrine by discarding the seal-based substitute for consideration and adopting Restatement § 87(1), but it affirmed enforcement of the tenant’s right of first refusal and denied postjudgment relief because the agreement remained enforceable and the movant did not satisfy Rule 60(b)’s requirements.


Knott v. Racicot, 442 Mass. 314, 812 N.E.2d 1207 (Mass. 2004)