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Law School Case Brief

Forman v. Benson - 112 Ill. App. 3d 1070, 68 Ill. Dec. 629, 446 N.E.2d 535 (1983)

Rule:

A reasonableness standard is favored by the law when the contract concerns matters capable of objective evaluation. However, where the circumstances are such that it is clear a provision was added as a personal concession to one of the contracting parties, the subjective, rather than the objective standard, should be applied.

Facts:

The parties, plaintiff buyer and defendant seller, entered into an installment contract where the seller inserted a requirement that the contract was "subject to" the seller approving the buyer's credit report. After the contract was signed, the buyer and seller discussed new terms regarding the purchase price and interest rate. The seller ultimately rejected the contract, allegedly on the basis of the buyer's credit report. The buyer sued for and was granted specific performance, which the seller appealed. Defendant seller appealed the judgment from the Circuit Court of Lee County (Illinois), ordering specific performance of the installment contract.

Issue:

a) Did the trial court err when it applied a standard of reasonableness to the defendant's approval of plaintiff's credit report?

b) Did the trial court err when it order specific performance of the real estate conract?

Answer:

a) Yes; b) No

Conclusion:

On appeal, the court held that the trial court erred when it applied a standard of reasonableness to seller's approval of the credit report because it was a satisfaction clause added as a concession or inducement for the seller, which would be subject to the seller's subjective evaluation. However, the evidence indicated that the real reason for seller's rejection of the contract had to do with the price and interest rate, which was sufficient to support a finding of bad faith on the seller's part. Therefore, the trial court properly granted specific performance to the buyer.

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