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DAF Builders, Inc. v. NDJ Realty

A-6237-98T1 (N.J. Super. App. Div. 2001) (Unpublished)

CONTRACTS—Equity will not permit one party to frustrate the other party’s ability to reap the rewards of its contract by refusing to perform an act required by the contract.

A construction contract provided that if the work was not completed by a particular date, the work would cease and the property owner would pay the contractor based upon the “value of work completed,” i.e. “the cost of material (wholesale) and labor (at a reasonable and standard rate) to be determined by a third-party chosen and agreed upon” by the parties. When it became necessary to choose such an appraiser, the property owner refused to do so and a suit was filed. At trial, the property owner “frankly admitted” that its refusal was “intended to prevent their having to pay any additional damages.” The lower court dismissed the complaint, stating that it did not “have the authority under the agreement [to appoint the third party] because there’s simply not a sufficient amount of direction in the agreement to justify [] appointing a third party.” The Appellate Division disagreed. While it criticized the way in which the contract was drafted, it felt that the provision for determining the value of both material and labor was “a beacon light of clarity.” It believed that the cost of labor “at a reasonable and standard rate,” meant a “standard rate unless it is unreasonable.” It pointed out that the agreement did not provide for arbitration, “but for an independent third party to calculate the value of the completed work on the basis of a formula the parties set forth in clear and unambiguous terms.” It further held that “[e]quity will not permit defendants to deliberately and calculatedly defeat the right they have given plaintiffs to recover their costs.” The matter was remanded to the lower court with directions to appoint a third person to fix the value of the work done.

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