## Facts

- Buyers agreed to purchase sellers’ Stamford, Connecticut residence for $85,000 and paid an $8,500 deposit.
- The contract made the sale subject to buyers obtaining a first mortgage of $45,000 for at least 20 years at an interest rate not exceeding 8.5%.
- Buyers promised “due diligence” in seeking the specified financing; if unsuccessful with timely notice, the contract would terminate and all sums paid would be refunded.
- Buyers’ attorney applied to a lending institution for a $45,000 mortgage at 8.25% for 25 years, believing it was the only institution likely to offer a $45,000 first mortgage on a single-family home at that time.
- The lender issued a commitment for $45,000 at the prevailing closing rate but not less than 8.75%, exceeding the 8.5% cap.
- Buyers timely notified sellers that the commitment did not satisfy the contingency and demanded return of the deposit.
- Sellers proposed an indefinite “funding arrangement” to cover the difference between 8.75% and 8.5% over 25 years; buyers refused and sellers withheld the deposit.
- Buyers sued to recover the deposit; sellers counterclaimed seeking relief based on the contract.

## Issues

1. Whether the mortgage contingency clause created a condition precedent to the parties’ duty to perform the sale contract.
2. Whether the buyers exercised the required due diligence in attempting to obtain mortgage financing that met the contract’s specified terms.
3. Whether the sellers’ post-notice offer to subsidize the interest-rate difference obligated the buyers to proceed or otherwise defeated the buyers’ right to recover the deposit.

## Decision

- The Supreme Court of Connecticut affirmed judgment for the buyers, including judgment against the sellers’ counterclaim.
- The financing clause was a condition precedent; because financing meeting the contract’s interest-rate cap was not obtained, the contract did not become binding.
- The trial court could properly find due diligence where the buyers applied to the only lender their informed attorney believed might satisfy the contingency; the law does not require futile efforts.
- The sellers’ proposed interest-subsidy arrangement did not cure the failure of the condition precedent and could be rejected by the buyers.
- Under the contract’s terms, the buyers were entitled to a refund of all sums paid upon timely notice of unsuccessful financing.

## Legal Principles

- Express mortgage-contingency language (“subject to and conditional upon”) commonly establishes a condition precedent to contractual performance.
- Failure of a condition precedent discharges the parties’ duty to perform and, where the contract so provides, requires return of the buyer’s deposit upon timely notice.
- A contractual “due diligence” obligation in seeking financing is satisfied by reasonable efforts under the circumstances; multiple applications are not required when further applications would be futile.
- A seller cannot unilaterally revive or modify obligations after failure of a condition precedent by offering alternative financial arrangements not required by the contract.

## Conclusion

The court enforced the mortgage contingency as written: the buyers reasonably attempted to secure the specified loan, could not obtain financing within the agreed interest-rate cap, and—after timely notice—were entitled to rescind and recover their deposit despite the sellers’ later offer to offset the higher rate.


Luttinger v. Rosen, 164 Conn. 45, 316 A.2d 757 (Conn. 1972)