PACK 2000, INC. v. EUGENE C. CUSHMAN, SC 18789

Judicial District of New London

Contracts; Whether the Plaintiff was Required to Comply Strictly With the Terms of its Land Lease Contracts in Order to Exercise its Options to Purchase the Defendant’s Properties.  In connection with the transfer of two muffler shops to the plaintiff, various agreements were entered into by the parties.  The defendant leased the properties on which the shops were located to the plaintiff, and each lease agreement contained a clause that provided the plaintiff with options to purchase the properties if it complied with the terms and conditions of the lease agreements, as well as related promissory notes, a letter of intent and a management agreement.  When the plaintiff sought to exercise the options to purchase, the defendant determined that it had failed to comply with the terms and conditions of the various agreements.  The plaintiff then brought this action against the defendant, claiming that it was entitled to specific performance of the options to purchase the properties.  The trial court rendered a judgment for the plaintiff, concluding that it had substantially complied with the terms and conditions of the options to purchase.  The defendant appealed, arguing that the court applied an improper standard in concluding that the plaintiff had complied with the conditions precedent to exercise its options to purchase.  It asserted that the plaintiff was required to comply strictly with the conditions precedent.  The Appellate Court (126 Conn. App. 339) agreed and reversed the trial court’s judgment.  It stated that in Brauer v. Freccia, 159 Conn. 289 (1970), the Supreme Court determined that when a lease provides the lessee with the option to purchase property subject to certain terms and conditions, the right of the lessee to exercise the option is contingent upon the lessee’s strict compliance with those terms and conditions.  It further stated that while the doctrine of substantial compliance is the general rule with respect to bilateral contracts to buy and sell real estate, which create a mutual obligation on one party to sell and on the other to buy, it is not the general rule with respect to unilateral options to purchase, which merely give the right to purchase without imposing any obligation to purchase.  It thus held that in light of Brauer, a party retains its right to exercise an option to purchase property only by strict compliance with the conditions precedent to its exercise of the option.  In this appeal, the Supreme Court will determine whether the Appellate Court properly reversed the trial court’s judgment.