News & Noteworthy

Authored - NJ Contract Law Update - In Sophisticated Residential Transaction, Buyer Held to His Own Due Diligence--and to Prove Materiality of a Representation Rising At Least to the Level of Causation
APRIL 19, 2013

In Viglione v. Frisina, ___ N.J.Super. ____, 213 WL 1457581 (App.Div. April 11, 2013), the Appellate Division upheld a jury award, supplemented by certain trial-court rulings, that led to the following results:

1. Where (a) conversations were either ambiguous or disputed, (b) the buyer's attorney added an Addendum about the usability of the property for boating, (c) that attorney was not called to testify, and (d) no specific boat or type of boat was warranted as usable--and (e) where the buyer implied that he was to perform some due diligence on his own--the buyer's claims of breach of contract, fraud, negligent misrepresentation, and the like were defeated.

2. Also defeated was a claimed fraudulent misrepresentation that there was no foreclosure in process--a representation which was literally true at the time made, but should have been supplemented when foreclosure later commenced, in accordance with standard practice. The buyer's main proof problem appears to have been that his expressed fear about the foreclosure issue was that a foreclosure could have 'stolen' the property away from him prior to the closing--a fear which was not warranted and never materialized.1 Implicitly, there was neither materiality nor causation.

3. (a) The final significant ruling related to mitigation of damages, which is applicable in both tort and contract contexts. Here, when the buyer backed out of the sale, the seller re-sold at a lower price. The question was whether the resale price and the efforts relating thereto were reasonable.

(b) Mitigation actually relates to two concepts: (i) has mitigation actually occurred, thus reducing the amount recoverable?; and (ii) were reasonable mitigation efforts undertaken, whether or not successful? In Viglione, mitigation efforts were undertaken; and a fact-issue was presented as to whether the efforts were reasonable. Because the seller's efforts at least arguably were not optimal, a jury issue was presented--and the jury essentially 'split the baby'.

The moral of the story is that even when dealing with sophisticated parties, language protecting against misrepresentations must be very precise, particularly when the language is being drafted by 'your side'. Even though under Pacifico there should not be a presumption against the drafter, the Viglione Court constructed a 'mini-presumption' in the form of an inference arising by not calling the party's own attorney, who drafted the clause.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 An interesting side-issue discussed by the Court was the burden of proof for fraud; which will be left to another Article.


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