A Capehart Scatchard Blog

Frustration of Purpose Valid Defense in NJ Contract Action

By on February 26, 2014 in Blog with 0 Comments

By: Betsy G. Ramos, Esq.

The Doctrine of Frustration of Purpose is a valid defense in a breach of contract action. However, in JB Pool Management, LLC v. Four Seasons at Smithville Homeowners Assoc., 2013 N.J. Super. LEXIS 88 (June 13, 2013 App. Div.), the Appellate Division held that this defense must be pled as an affirmative defense for a defendant to defend on that basis.

In JB Pool, a pool management company agreed to a one year contract to supply a condominium association with lifeguards and maintenance services for the association’s indoor pool. During the term of the contract, a mold infestation was discovered in the pool facilities, prompting government officials to close the pool for 7 months while the mold was being remediated.

JB Pool sued the association for 4 months of unpaid service fees while the pool was closed. At trial, the trial court judge permitted the jury to consider whether the monthly fees could be excused based upon the doctrine of frustration of purpose, despite the association’s failure to raise this doctrine as an affirmative defense in its answer. Based upon this defense, the jury found the association not liable to pay the fees.

This defense would find that performance is “excused” where the main purpose of the contract is frustrated or destroyed due to an unanticipated supervening event. This condition would have to go to the essence of the contract. Here the defendant argued that the mold-related shutdown of the indoor pool excused its monthly payment obligations during the closure period.

Because the association had not specifically pled this doctrine as an affirmative defense, the Appellate Division found that the plaintiff was prejudiced in not being able to pursue discovery or present pertinent evidence at trial on this issue. However, because there was no prior case law requiring it to be affirmatively pled before this case was decided, the court decided to reverse the jury verdict and remand the case back to the trial court. The plaintiff would be permitted to conduct discovery on this issue and there would be a new trial on the breach of contract issue.

This case recognizes a new viable defense in breach of contract actions. However, it also points out the potential hazard of not identifying all possible affirmative defenses when the defendant files its answer. But for the court’s leniency in permitting the defendant to continue to pursue this defense, the association would have been foreclosed from defending on this basis.

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Betsy G. Ramos

About the Author

About the Author:

Ms. Ramos is an Executive Committee Member and Co-Chair of the Litigation Department at Capehart Scatchard, P.A. located in Mount Laurel, New Jersey. She is an experienced litigator with over 25 years experience handling diverse matters. Practice areas include tort defense, business litigation, estate litigation, tort claims and civil rights defense, construction litigation, insurance coverage, employment litigation, shareholder disputes, and general litigation.

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