Affirmative Defense in New Jersey Breach of Contract Lawsuit

In many breach of contract cases, the breaching party can reduce or eliminate its liability by arguing that the circumstances surrounding the agreement justified the breach. These are referred to as an “affirmative defense” and must generally be raised in the defendant’s answer and proven at trial. 

In a recent case, the Appellate Division of the New Jersey Superior Court clarified that defendants must plead frustration of purpose as an affirmative defense in order to avoid liability when a supervening event makes a defendant’s obligations impractical or impossible to perform.

The Facts of the Case

JB Pool Management v. Four Seasons at Smithville Homeowners Association Inc. involved a contract for pool-related services between a pool management company and a homeowner’s association. During the term of the contract, the condominium’s indoor pool was closed for several months due to mold, and the parties disagreed over whether fees were due under the agreement during this time.

While J.B. Pool Management raised a number of defenses to the resulting breach of contract lawsuit, it did not assert frustration of purpose. Rather, the trial judge raised it during the process of instructing the jury as a more suitable alternative to a proposed charge of impossibility of performance. The jury ultimately found the association was not liable for the four months of disputed fees.

On appeal, J.B. Pool Management raised a number of grounds for reversal, including that the trial court improperly and prejudicially charged the jury on the doctrine of frustration of purpose, despite the fact that Four Seasons had not raised the doctrine as an affirmative defense in its pleadings.

The Court’s Decision

The Appellate Division concluded that litigants seeking to invoke the doctrine of frustration of purpose to avoid their contractual duties generally should plead the doctrine as an affirmative defense. However, the panel acknowledged that because New Jersey law was previously unclear on the issue, it would be unfair to impose the requirement on J.B. Pool Management retroactively.

“Instead, we hold that, in future cases, the defense of frustration of purpose, or impossibility of performance, be raised in a responsive pleading, unless exceptional circumstances excuse that oversight,” the court held.

The court further found that J.B. Pool Management was prejudiced by the late notice of the frustration of purpose affirmative defense and reversed the dismissal of the breach of contract claim. It remanded the case for additional discovery focused on that defense, followed by a new trial.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Robert Levy, or the Scarinci Hollenbeck attorney with whom you work.