Title: Peden v. Gray
Citation: N/A
Docket Number: 188, 2005
State: Delaware
Issuer: Delaware Supreme Court
Date: October 14, 2005

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
WILLIAM T. PEDEN, III and  
§ 
KAREN B. PEDEN, 
 
§ 
 
 
§ 
No. 188, 2005     
 
Plaintiffs Below, 
§ 
 
Appellants, 
§ 
Court Below: Court of Chancery  
 
 
§ 
of the State of Delaware in and for 
              v. 
 
§ 
Sussex County 
 
 
§ 
GERARD F. GRAY, 
§ 
C. A. No. 040-S 
 
 
§ 
 
 
Defendant Below, 
§ 
 
 
Appellee. 
§ 
 
 
 
Submitted: September 20, 2005 
 
 
Decided: 
October 14, 2005 
 
Before HOLLAND, BERGER and JACOBS, Justices. 
 
O R D E R 
 
 
This 14th day of October 2005, upon consideration of the briefs of the parties 
and the record in this case, it appears to the Court that: 
 
1.   This appeal arises out of a dispute over a failed contract for the 
purchase of real estate between the buyers, William T. and Karen B. Peden (“the 
Pedens”), and the property owner, Gerard F. Gray  (“Gray”).  The Pedens filed an 
action in the Court of Chancery seeking specific performance of the contract.  
After trial, the Court of Chancery dismissed the case and entered final judgment in 
favor of the owner, Gray.  The issue is whether the Court of Chancery properly 
considered parol evidence in determining an appropriate settlement date for the 
 
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contract, where the closing date specified in the original written contract had 
passed, but the parties continued to negotiate under an addendum that did not 
specify a new closing date.  Because of the ambiguity surrounding the closing date, 
the Vice Chancellor properly considered parol evidence to determine a new 
settlement date—a deadline that the buyers missed.  Nor did the Vice Chancellor 
abuse his discretion in concluding that the buyers had not sustained their burden of 
proof to show their entitlement to specific performance by clear and convincing 
evidence.  Because the Court of Chancery committed no error of law or fact, we 
affirm.   
 
2. 
Gerard Gray listed his home in Georgetown, Delaware, for sale through 
a realtor.  The Pedens offered $175,000 for the property.  Gray accepted that offer 
on August 1, 2003. 
 
3. 
The real estate contract (“the Agreement”) contained several critical 
provisions.  First, it provided that if the buyers did not secure financing on or 
before August 29, 2003, then either party could terminate the contract.  Second, the 
Agreement contained a “time is of the essence” clause, which provided that the 
parties must abide by the agreed-upon dates and that a failure to do so could result 
in default or a waiver of contractual rights.  Under the Agreement, settlement 
would occur on September 18, 2003, but provided, however, that if additional time 
was necessary to “secure a survey, or to prepare the necessary legal and financial 
 
3
settlement documents, the date of settlement shall be extended for a reasonable 
time to effect these conditions.”1  Finally, the Agreement contained an 
“integration” clause, providing that the Agreement and any addenda constituted the 
entire contract, and could not be modified except by written agreement signed by 
all parties.   
 
4. 
Six days before settlement, on September 12, 2003, the buyers prepared 
and submitted to the owner an addendum that did not provide for any extension of 
the settlement date.2  The lender had denied financing to the buyers on August 29, 
but the buyers did not disclose that denial to the owner, as the Agreement explicitly 
required.  The owner agreed to the addendum in writing on September 30.  At trial, 
the owner testified that he told his realtor (who in turn had told the buyers’ 
attorney) that he (Gray) had accepted the addendum on the condition that 
settlement would occur quickly.     
 
5. 
On October 3, Eric Howard, the buyers’ attorney, wrote a letter to the 
owner disclosing that the buyers had not obtained financing.  Attorney Howard 
                                          
 
1   Residential Contract of Sale at A-174. 
 
2 The addendum proposed to reduce the purchase price from $175,000 to $165,000 to 
compensate for the necessary replacement of the foundation, allegedly to satisfy the lender’s 
concerns about a property appraisal that uncovered structural problems.  The owner agreed to the 
addendum in return for a quick settlement and also on the condition that the buyers produce 
evidence of this defect. 
  
 
4
stated that the buyers were continuing to seek financing and that settlement would 
occur as quickly as reasonably possible after they obtained financing. 
 
6. 
After receiving the October 3 letter, the owner and Howard agreed (by 
telephone) to a settlement date during the week of October 20.  The owner 
confirmed that in a follow up letter to Howard on October 9.  In that letter the 
owner asked Howard to inform him “if there is anything else he could do to ensure 
that closing is completed during the week of October 20.”3  That same day, 
Howard ordered a title search to be performed by October 20, 2003.  The title 
search was not completed until October 31, 2003, however.  There is no evidence 
that arrangements could not have been made for the title search to be completed by 
the week of October 20.   
 
7. 
The week of October 20, 2003 passed without any word from the 
buyers or their attorney.  Ultimately, on October 30, the owner instructed his 
realtor to declare the Agreement null and void.  On November 4, after learning of 
this, Howard immediately advised Gray, the owner, that the buyers were ready, 
willing, and able to perform.  At trial, however, Howard admitted that he had not 
prepared any documents for settlement, nor had he received any documents from 
the lender as of November 4.    
                                          
 
3 October 9, 2003 letter at A-191. 
 
 
5
 
8. 
The buyers brought this specific performance action on November 5, 
2003.  The Court of Chancery dismissed the buyers’ claim on the grounds that the 
buyers were twice in breach of the contract and had not proven their entitlement to 
specific performance by clear and convincing evidence.  The Court entered final 
judgment in favor of the owner, from which the buyers have appealed.  
 
9. 
The buyers advance two claims of error on appeal.  First, they contend 
that the Court of Chancery erred by considering parol evidence to determine a new 
settlement date.  Second, they claim that the Court erred in concluding that the 
buyers were not ready, willing, and able to perform their part of the Agreement.   
 
10. This Court reviews de novo a trial court’s use of parol evidence in 
contract interpretation, because the question presented is one of law.4  The parol 
evidence rule bars “evidence of additional terms to a written contract, when that 
contract is a complete integration of the agreement of the parties.”5  Parol evidence 
may not be used to interpret a contract or search for the parties’ intentions where 
                                          
 
4 Honeywell Int’l Inc. v. Air Prod. & Chem., Inc., 872 A.2d 944, 950 (Del. 2005). 
 
5 Teeven v. Kearns, No. 93L-04-032, 1993 WL 1626514, at *3 (Del. Super. Ct. Dec. 3, 1993), 
citing Husband (P.J.O.) v. Wife (L.O.), 418 A.2d 994, 996 (Del. 1980). 
 
 
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the contract is clear and unambiguous on its face.6  On the other hand, parol 
evidence is admissible to resolve a contractual term that is ambiguous.7   
 
11. Here, the trial court found that the omission from the addendum of a 
new settlement date and the absence of any reference to the “time is of the 
essence” clause in the Agreement, coupled with the parties’ continuing 
negotiations over a new settlement date, created an ambiguity.  Ambiguity in a 
contract must be resolved against the drafter.8  The buyers’ argument that parol 
evidence was improperly considered in interpreting the contract fails because they 
drafted the addendum containing the ambiguity.  Because the addendum was 
ambiguous on its face, the Court of Chancery correctly considered extrinsic 
evidence to determine the contracting parties’ intent. 
 
12. Where a trial court’s interpretation of a contract is based on factual 
findings extrinsic to the contract or inferences drawn from those findings, this 
Court will defer to the trial court’s findings so long as they are supported by the 
                                          
 
6 Teeven, 1993 WL 1626514, at *3, citing Pellaton v. Bank of New York, 592 A.2d 473, 478 
(Del. 1991). 
 
7 Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (“When 
the provisions in controversy are fairly susceptible of different interpretations or may have two 
or more different meanings, there is ambiguity.  Then the interpreting court must look beyond 
the language of the contract to ascertain the parties' intentions.”). 
 
8 Hudson v. D & V Mason Contractors, Inc., 252 A.2d 166, 168 (Del. Super. Ct. 1969). 
 
 
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record and are the product of an orderly or logical deductive process.9   The buyers 
contend that the only proper construction of the addendum is that it operated as a 
waiver of the “time is of the essence” clause because it specified no new closing 
date.  As a consequence (the buyers argue), they were entitled to a reasonable 
period of time in which to perform their obligations under the contract,10 and the 
Court of Chancery erred in limiting the (extended) settlement date to the week of 
October 20, 2003.  
 
13. The Court of Chancery did not abuse its discretion in concluding that 
the “time is of the essence” clause was not waived, because there was no contract 
language or extrinsic evidence supportive of an intent to waive that provision.  
Moreover, the contract explicitly allowed a reasonable extension of time for 
surveys and preparation of documents, and the seller had acceded to a 42-day 
extension to the buyers.  That extension, the trial court found, was reasonable, yet 
the buyers failed to perform within that extended period.11 
 
14. The Court of Chancery found as fact that, after signing the addendum, 
the parties had agreed to the week of October 20, 2003 as the new closing date.  
                                          
 
9 Honeywell, 872 A.2d at 950, citing Klair v. Reese, 531 A.2d 219 (Del. 1987).  
 
10 Bryan v. Moore, 863 A.2d 258, 261 (Del. Ch. 2004) (If time is not of the essence in a contract, 
the court will allow a reasonable time to perform.). 
 
11  A thirty-day extension has been held a reasonable amount of time to perform when time was 
not of the essence.  Bryan, 863 A.2d at 261. 
 
 
8
That finding was based on conversations and correspondence between the owner 
and the buyers’ attorney, all of which are supported by the record.  Therefore, the 
Court of Chancery did not err in concluding that the buyers’ failure to perform by 
October 20, 2003 exceeded the reasonable grace period found to have been agreed 
to by the parties.   
 
15. This Court reviews a trial court’s grant or denial of specific 
performance for abuse of discretion,12 because specific performance is a matter of 
grace that rests in the sound discretion of the court.13  To merit an award of specific 
performance, a party must prove that “he has a valid contract to purchase real 
property and that he is ready, willing, and able to perform his obligations under the 
contract.”14  Specific performance will not be granted to a party who is in default 
of a material obligation under the contract, unless that party is excused from 
performance of that obligation.15  The party seeking specific performance has the 
burden of proving entitlement by clear and convincing evidence.16 
                                          
 
12 Behrens v. Behrens, 829 A.2d 935, No. 12, 2003, 2003 WL 21730131, at *2 (Del. July 24, 
2003). 
 
13 Safe Harbor Fishing Club v. Safe Harbor Realty Co., 107 A.2d 635, 638 (Del. Ch. 1953). 
 
14 Bryan, 863 A.2d at 260. 
 
15 Safe Harbor, 107 A.2d at 637. 
 
16 In re IBP, Inc. Shareholders Litigation, 789 A.2d 14, 31 (Del. Ch. 2001). 
 
 
9
 
16. The Court of Chancery’s determination that the buyers failed to 
establish their entitlement to specific performance by clear and convincing 
evidence is supported by the record.  The Court of Chancery found that the 
Agreement (as modified by the addendum) was a valid and enforceable contract, 
and that the buyers had not proven that they were ready, willing and able to 
proceed to settlement by the agreed-upon extended date.   
 
17. Specifically, the Court of Chancery determined that:  (1) time remained 
of the essence and the buyers were aware of that; (2) the buyers breached the 
financing condition in the contract, and had actively concealed that fact from the 
owner; and that (3) although the buyers knew they would be unable to meet the 
settlement deadline (because they lacked financing), they drafted an ambiguous 
addendum that they later attempted to use in an effort to avoid the effect of the 
“time is of the essence” clause.  Because specific performance will not be granted 
to a party in breach of the agreement sought to be enforced, those factual findings 
amply support the Court’s denial of specific performance.   
 
18. Finally, the Court of Chancery found that the buyers were not ready to 
proceed to settlement on October 20, and indeed were unprepared to do so even by 
November 4, 2003.  That failure to perform was not excused, the trial court found, 
because the title search could have been performed on time, and (if the buyers’ 
attorney had moved more expeditiously) the settlement and financial documents 
 
10
could have been prepared by the extended settlement date.  Because these findings 
are supported by the record, the Court of Chancery did not abuse its discretion in 
denying specific relief to the buyers.    
 
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of 
Chancery is AFFIRMED. 
 
 
 
 
 
 
 
BY THE COURT: 
 
 
 
 
 
 
 
 
 
 
/s/ Jack B. Jacobs  
 
 
 
 
 
                      
 
         Justice