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A contract for a loan without specification of an interest rate is too vague and indefinite to be enforced since the failure to specify at what rate the buyer is to obtain a mortgage loan causes a failure of a condition precedent to the enforceability of the contract. It must be noted that variations in the payment schedule are a matter between the lender and the buyer that do not affect a buyer's obligations to a seller. In contrast, the interest rate is an essential term necessary to enable the courts to enforce the contract between buyer and seller.
Plaintiffs Robert Homler and Barbara Homler filed the present breach of contract action against defendant Mohannad Malas, alleging that defendant Malas agreed to buy and plaintiffs agreed to sell a single family residence, that the agreement was conditioned on defendant obtaining a loan to finance the purchase, and that defendant breached the agreement by failing to diligently pursue in good faith his applications for a loan. Defendant moved for summary judgment on the ground that the contract was too vague and indefinite to be enforced in that the terms of the loan to be obtained by defendant under the terms of the financing contingency were not sufficiently identified. The defendant broker, Harry Norman Realtors, interpleaded the earnest money into the registry of the trial court and sought attorney fees for having to interplead. The lower court granted summary judgment to the defendant on the claims and counterclaims and awarded attorney fees to the broker. The plaintiffs appealed, contending that the contract did not fail for vagueness or indefiniteness.
Was the contract in question unenforceable for being vague and indefinite, thereby warranting the grant of summary judgment in favor of the defendant?
The court noted that the document executed by the parties was created using a pre-printed contract, including a number of blank spaces for insertion of various information. With regard to the loan contingency provisions there were blank spaces for certain terms of the loan to be obtained by the buyer. Two spaces where interest rates could have been provided, as well as a third space where a monthly payment amount could have been provided and from which an interest rate could be calculated, were left blank. The court noted that the appellate courts of Georgia have consistently held that such a contract was too vague and indefinite to be enforced since the failure to specify at what rate the buyer was to obtain a mortgage loan would cause a failure of a condition precedent to the enforceability of the contract. According to the court, the interest rate was necessary for the court to enforce the contract between the plaintiff and the defendant. Given that the contract was unenforceable as a matter of law, the defendant was entitled to recover his earnest money.