Kenneth Michaels, Jr., Bauch & Michaels, LLC, Chicago
312-588-5000 | Email Kenneth Michaels, Jr.
Claims for Wrongful Prevention of Condition Precedent to Real Estate Closing and for Fraud Fail To Convince Court
When a contract to sell a condominium unit was contingent on the closing of a separate deconversion contract that did not occur, the court held that the buyer had not breached under the “wrongful prevention doctrine.” Blitz Capital Group LLC v. North Dearborn Property LLC, 2026 IL App (1st) 251008-U. The appellate court affirmed dismissal of the plaintiff’s breach of contract and fraud claims. 2026 IL App (1st) 251008-U at ¶1.
Facts
The defendant and 200 North Dearborn Condominium Association were under contract to purchase and “deconvert” condominium units. 2026 IL App (1st) 251008-U at ¶2. The subject of our examination here is the separate, contingent contract the defendant entered into with the owner of the penthouse unit and several parking spaces. Id. If the contract with the association terminated, the contract with the plaintiff in this case would also terminate. Id.
After the association terminated its contract with the defendant, the plaintiff sued the defendant alleging two counts of breach of contract, common-law fraud, and violation of the Illinois Consumer Fraud & Deceptive Business Practices Act. 2026 IL App (1st) 251008-U at ¶3. The trial court dismissed the fraud counts without prejudice, and the plaintiff chose not to replead those counts, so they were dismissed with prejudice. 2026 IL App (1st) 251008-U at ¶4. The trial court also dismissed the breach of contract claims. 2026 IL App (1st) 251008-U at ¶5. The plaintiff alleged that the defendant wrongfully caused the condition precedent of closing the association contract to fail and that the defendant violated the covenant of good faith and fair dealing by not closing the association contract. Id.
The association contract did not have a financing contingency. 2026 IL App (1st) 251008-U at ¶9. The due diligence provision under the association contract was extended by mutual agreement of the association and the defendant many times. 2026 IL App (1st) 251008-U at ¶11. In August 2023, the defendant told the association that it had secured financing and would be closing within the next two months. 2026 IL App (1st) 251008-U at ¶13. When no closing occurred, the plaintiff demanded that the defendant close within 30 days, which letter was ignored. Id.
In February 2024, the plaintiff filed the lawsuit. 2026 IL App (1st) 251008-U at ¶14. Meanwhile, the association extended its contract with the defendant for the seventh and final time with a closing date in May 2024. When the defendant again failed to close, the association terminated its contract with the defendant. 2026 IL App (1st) 251008-U at ¶12.
As to its breach of contract claims, the plaintiff alleged that by not responding to the plaintiff’s request for an assurance of the defendant’s ability and intent to close, the defendant breached the spirit and terms of the contract and of the implied covenant of good faith and fair dealing. 2026 IL App (1st) 251008-U at ¶14. As to the fraud claims, the plaintiff alleged that by not including a financing contingency in the association contract, the defendant falsely represented that it had funds to close and misrepresented that they had financing. 2026 IL App (1st) 251008-U at ¶15. The plaintiff also alleged that the defendant misrepresented to the plaintiff that it had financing and, after extending closings, offered to buy units at market prices instead of the contract prices. Id. The plaintiff alleged that these misrepresentations constituted common-law fraud and deceptive acts under the Consumer Fraud Act. Id.
Analysis
The appellate court likened the “wrongful prevention doctrine” to estoppel. 2026 IL App (1st) 251008-U at ¶24. The doctrine prohibits a party from profiting by its wrongful conduct. Id., citing Cummings v. Beaton & Associates, Inc., 249 Ill.App.3d 287, 618 N.E.2d 292, 3030, 187 Ill.Dec. 701 (1st Dist. 1992). Under the doctrine, if a party causes a contractual condition to fail, the contract can still be enforced against the party because a party cannot cause a condition to fail and then take advantage of the failure to avoid liability. 2026 IL App (1st) 251008-U at ¶24. The court found that nothing in the record showed that the defendant had breached the association contract. 2026 IL App (1st) 251008-U at ¶25. After all the delays, the association, as it had a right to do, terminated the contract. Id.
Additionally, the appellate court rejected the plaintiff’s argument that the defendant breached its duty of good faith and fair dealing that is implied in every contract. 2026 IL App (1st) 251008-U at ¶27. Under this covenant, a party must exercise any discretion it has under the contract reasonably, not arbitrarily or capriciously. Id. In this case, the plaintiff did not show that the defendant failed to take reasonable efforts to close the association contract, which was a condition precedent to the plaintiff’s contract. Id.
Similarly, the appellate court affirmed dismissal of the fraud claims. It could not find any cases (nor did the plaintiff argue any) to support the plaintiff’s argument that the failure to include a financing contingency implies that the buyer has the funds to close. 2026 IL App (1st) 251008-U at ¶34. Also, the plaintiff had no right to demand a closing before the association contract closed because closing the association contract was a condition precedent to the plaintiff’s contract closing. 2026 IL App (1st) 251008-U at ¶35. The plaintiff also could not show detrimental reliance to support either common-law fraud or Consumer Fraud claims. 2026 IL App (1st) 251008-U at ¶36.
For more information about condominium law, see CONDOMINIUM LAW: GOVERNANCE, AUTHORITY, AND CONTROLLING DOCUMENTS (IICLE®, 2024). Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.