County of Essex v. Inset Industries, Inc.

A-4131-96T1 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: February 5, 1998

CONTRACTS; OPINIONS—A contract that provides for a money back guarantee if, in the buyer’s opinion, the goods do not perform as specified is essentially a personal satisfaction contract. Therefore, a buyer under such a contract may invoke the guarantee if it acts in good faith and has an objectively reasonable basis for its dissatisfaction.

The County of Essex entered into a contract to purchase 100 fuel stabilizers. Because of the experimental nature of the product and the lack of any objective proof of the stabilizers’ performance, the contract had a one year guarantee whereby the County would get a full refund if it was not satisfied with the product. Eleven months after the purchase, after an independent study found that the product did not function as represented, the County demanded the refund. When the supplier refused, the County sued for breach of contract. The Law Division granted summary judgment to the County, finding that it was entitled to a refund as a matter of law.

The Appellate Division found that the guarantee clause clearly and unambiguously permitted a full refund if the stabilizers did not perform as specified. The Court found this to be essentially a personal satisfaction contract, and therefore, not subject to a judicial determination of whether the goods were objectively satisfactory. Thus, the only question was whether the County acted in good faith and on an objectively reasonable basis when it sought a refund. The Court held that it was proper for the County to rely on the independent study. The fact that the County did not seek a refund until the eleventh month was not evidence of bad faith, especially since the refund was sought upon becoming aware of the results of the independent study. In upholding the lower court’s grant of summary judgment, the Court concluded that no jury could find that the County had acted either unreasonably or in bad faith.