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Habib v. Fleet National Bank

A-317-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; DAMAGES—Specific performance is a discretionary remedy and the decision to grant or withhold it rests on equitable principles, and absent fraud, money damages may be limited to an agreed-upon amount by contract.

For over seventy years, an insurance and real estate business leased premises from a bank and its predecessors. Its lease gave the tenant the right of first refusal to purchase the property. Specifically it said: “Tenant shall be given 72 hours notice upon Landlord’s receipt of a Contract on the property. Within said 72 hour period, Tenant must advise Landlord, in writing, of its intention to purchase the property under the same terms and conditions of the contract.” The bank decided to sell the property and solicited bids. The buyers were advised of the terms and conditions of the right of first refusal. The bank selected the highest bid and executed a contract late one Thursday. The bank officer dictated a letter to the tenant, telling it of the successful bid and including a copy of the contract. The letter, however, did not go out on Friday. In fact, it went out by overnight delivery on the following Monday. Two days later, the tenant’s attorney responded, advising the bank that its tenant was exercising its right of first refusal. About two weeks later, the bank notified the successful bidder that the property was being sold to the tenant and returned its deposit. While not acknowledging a breach, it forwarded an additional $500, the stated amount of liquidated damages under the contract.

The disappointed buyer sued for specific performance, but the Chancery Division denied that relief. On appeal, the Appellate Division upheld the lower court. It pointed out that “[s]pecific performance is a discretionary remedy and the decision whether to grant or withhold such relief must rest on equitable principles. According to the Court, the chancery judge “took all of the appropriate factors into consideration in reaching his conclusion. He weighed the impact upon [the disappointed buyer] of the loss of an unformed business opportunity against the effect upon [the tenant] if it lost the site from which it had conducted its business for approximately seventy years.” The lower court properly concluded that the tenant would suffer a greater harm than would be suffered by the disappointed buyer. Further, whether or not the bank’s action was a breach of the purchase contract with the disappointed buyer was immaterial. The contract provided for a fixed amount as liquidated damages and even if the bank breached the contract, the disappointed buyer was entitled to no more than the agreed-upon amount.

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