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Authored - NJ Contract Law Update - Enforceability Of Clause For A Party's Compliance "In Good Faith To The Extent It Deems Reasonable"
SEPTEMBER 09, 2013 | Windels Marx - Commercial Litigation

A recent New Jersey Appellate Division case holds that a triable issue might exist regarding language that called for compliance by a contract party (a municipality) "in good faith to the extent it deems reasonable".

We have all seen clauses that allow parties (e.g., landlords) to take steps "in their sole discretion". The language quoted in the recent case seems similar, but the Court seemed to grant it less deference than it presumably would have afforded the "sole discretion" language. Specifically, the Court held that a triable issue might exist--and that a discoverable issue did exist--because of the municipality's failure to submit to the State a formal "pre-application", which apparently was presumptively required (or so the plaintiff successfully argued), "as well as [an issue of] identify[ing] replacement lands" (another part of the process being described).

It is noteworthy that even a governmental party was 'held in' on the basis of such language. The moral of the story is that if bargaining position allows, stronger language such as "sole discretion" must be considered to avoid a triable or 'discoverable' issue.

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.

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