Wolf v. Marlton Corp.

Superior Court of New Jersey, Appellate Division · 1959 · Contracts

Contractsduressbusiness compulsionwrongful threatslawful act as duressprevention of performancebreachdeposit forfeiture

Facts

Plaintiffs contracted to buy a house to be built by defendant builder and paid a $2,450 deposit, with another $2,450 due when the house was "closed in." Although the house was closed in, plaintiffs did not make the second payment because they were never personally notified, and the builder ultimately sold the house to someone else. During later discussions, plaintiffs' attorney stated that plaintiffs were ready, willing, and able to go through with the purchase if forced, but indicated that they would then resell the house to an undesirable purchaser and that the builder would not be happy with the results. The builder's president testified that plaintiffs' attorney further threatened that forcing the settlement would ruin his building career and his tract sales, after which the builder refused to proceed and later declared the contract null and void while retaining the deposit.

Issue

Whether a buyer's threat to complete the purchase only in order to resell the home to an undesirable purchaser for the purpose of injuring the builder's business can constitute wrongful duress justifying the builder in treating the contract as breached. Also, whether the builder could rely on plaintiffs' failure to make the second payment when it had elected not to demand that payment.

Rule

If one party, by prevention or hindrance, makes it impossible for the other to perform a contract, the prevented party may treat the contract as breached and recover damages. Economic or moral duress may be the equivalent of physical duress: a threat may be wrongful even though the threatened act is lawful, if it is used for a malicious, unconscionable, or otherwise morally wrongful purpose and actually overbears the victim's will. A party that elects not to insist on a contractual payment after indicating it will not demand it may be estopped from later declaring a forfeiture on that ground.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Dana Mercer contracted to buy a townhouse from Red Mesa Homes, a fictional developer. When Dana later wanted out, her lawyer told Red Mesa's owner that if the company forced closing, Dana would complete the purchase and then immediately lease the unit to people the lawyer described as certain to frighten off other buyers, solely to damage sales in the development.

If Red Mesa refused to proceed after this conversation, which is the strongest argument that Dana, not Red Mesa, breached the contract?

Explanation. The majority held that a threat may be wrongful even if the threatened act is lawful, when used for a purely malicious, unconscionable purpose. If such a threat actually overbears the other party's will and prevents performance, the threatened party may treat the contract as breached. That is the best basis for Red Mesa's position here. (Derived from Wolf v. Marlton Corp. (n.d.).)