## Facts

- The sellers, James and Kathleen Moran, entered a written contract on December 22, 1995 to sell their house to the buyers, Mehmet and Susan Erk, for $505,000.
- The contract used a standard residential form containing an attorney-approval contingency allowing either party’s attorney to cancel by written disapproval within three business days after receipt of a fully executed contract.
- Within the three-day period, the buyers decided not to proceed, and their attorney sent timely written disapproval invoking the contingency.
- The sellers later sold the property in 1998 for $385,000 and sought damages for the difference and related carrying costs.
- After a nonjury trial, the trial court found the buyers acted in bad faith by instructing their attorney to disapprove, treated the contingency as waived, and awarded the sellers approximately $234,065.75 plus interest.
- The Appellate Division affirmed on a bad-faith/waiver theory.
- The Court of Appeals granted leave to appeal.

## Issues

1. Whether a broadly worded attorney-approval contingency in a residential real-estate contract implicitly limits disapproval to good-faith, legally based reasons.
2. Whether a timely attorney disapproval made because the client no longer wishes to proceed can constitute breach, waiver, or bad faith that preserves contract enforceability.

## Decision

- The Court of Appeals reversed the Appellate Division and dismissed the complaint.
- The Court held that, under the clause’s language, an attorney could disapprove for any reason or no reason, so long as the disapproval was timely and procedurally proper.
- Because the attorney-approval condition was validly exercised, the contract never became binding, and the sellers could not recover breach-of-contract damages.

## Legal Principles

- A standard attorney-approval contingency that contains no express substantive standard operates as an unqualified, time-limited termination right; timely written disapproval prevents contract formation.
- Courts will not imply a good-faith, reasonableness, or “legal-defect only” limitation into a broadly drafted attorney-approval clause absent clear contractual language.
- “Satisfaction” clause cases imposing good-faith limits are distinguishable when the contract lacks “satisfaction” or similar language importing a review standard.
- Parties that want attorney approval restricted to specified grounds must state those limits expressly; courts will enforce the clause as written rather than rewrite it based on after-the-fact fairness arguments.
- Allegations of “bad faith” cannot defeat the exercise of a contractual cancellation right where the contract grants an unrestricted disapproval option within a defined period.

## Conclusion

The Court of Appeals held that a generic three-day attorney-approval clause in a residential purchase contract permits counsel to disapprove for any reason, and a timely disapproval voids the deal and bars the seller’s breach-of-contract recovery.


Moran v. Erk, 11 N.Y.3d 452 (N.Y. 2008)