A Contract Remains Valid Even if the Parties to the Contract Did Not Initial Alterations, But Signed Everything Else

The Illinois Appellate Court has reversed and remanded a decision by a Cook County Circuit Judge relating to a sale agreement for a condominium purchase. In November 2010, the Habitat Co., the Gautreaux Development Manager for the Chicago Housing Authority, signed a purchase and sale agreement with Tera Healy to buy her condominium for $250,000. The contract was contingent on Habitat and Healy getting final approval from the U.S. Department of Housing and Urban Development (HUD) and Healy’s lender approving a short payoff.

These approvals were met, but the 3721-3723 Elston Condominium Association intervened, exercising its right of first refusal and purchased Healy’s condominium. The housing authority filed a lawsuit against the association, charging it with tortious interference of contract and breach of contract, seeking specific performance: the sale of the condominium.

The authority argued that the contract between Habitat and Healy was valid and binding. Moreover, the authority argued that the association did not have the right of first refusal contained in any of its declarations or bylaws, but nonetheless attempted to exercise this right.

The Chicago Housing Authority alleged that Habitat had completed its contractual requirements on April 1, 2011, but heard nothing from Healy despite repeated requests for an update until May 3, 2011. On May 5, Healy’s lawyer told the authority that the bank had approved the short sale and that the closing would be in five days, meaning May 10.

However, on May 6, Healy’s attorney told the authority that Healy had just closed with the association on the sale of the property. The authority demanded the condo for the agreed-upon price as well as $16,000 in damages and $14,000 in liquidated damages.

The contract between Healy and Habitat was entered into evidence. Although the contract was signed by both Healy and Habitat, at four points throughout the contract, alterations were made to the terms. In each case, a Habitat representative initialed the alterations, Healy did not, and the space for her to do so was blank.

At trial, Healy argued that equitable estoppel kept the authority from denying the right of refusal. According to Healy’s assertions, HUD informed Habitat that the association had the right of first refusal and it contacted Healy’s lawyer asking for the board to waive that right. The association board chose to exercise it instead.

Healy also argued that the contract was not valid because she had failed to initial the handwritten alterations to the short sale addendum. The trial court dismissed for the second reason, Healy’s failure to initial the alterations, but did not rule on the equitable estoppel. The authority appealed.

The appellate court found that Healy’s failure to initial the alterations did not prevent a contract from being formed. The court held that this would be the case even if the alterations were essential terms of the contract. This was because the unsigned alterations were “merely reiterations of provisions Healy signed elsewhere in the real estate contract and attached documents.”

The appellate court found that there had been an offer and an acceptance as well as consideration. There were terms agreed to in performance by the plaintiff. The contract was formed and potentially breached.

The appeals panel did not reach the issue of equitable estoppel as the circuit court had not ruled on it. The appellate court did however reverse and remand the circuit court’s decision to dismiss the contract as invalid and returned the case for further consideration.

Chicago Housing Authority v. 3721-3723 Elston Condominium and Tera Healy, 2014 IL App (1st) 130626-U (May 23, 2014).

Kreisman Law Offices has been handling contract litigation, real estate disputes in litigation and commercial litigation for individuals, families and businesses for more than 38 years in around Chicago and Cook County and its surround areas, including Chicago (Sauganash, South Shore, Koreatown, Chinatown, Canaryville, Bucktown, Bronzeville, Beverly, Austin, Archer Heights, Lincoln Square, Morgan Park, Printer’s Row, Rogers Park, Roscoe Village), Lake Forest, Northbrook, Oak Park, Oakbrook, Round Lake Beach, Schaumburg, St. Charles, Western Springs, Hinsdale, Cicero, Joliet, Waukegan, Aurora and Willow Brook, Ill.

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