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Kutzin v. Pirnie | 591 A.2d 932 (1991)

Few questions in the law have given rise to more fierce debate than the right of a party to recover money after breaching a contract without an excuse. In Kutzin versus Pirnie, the New Jersey Supreme Court was asked to decide this question in the context of a contract for the sale of land.

In 1987, Duncan and Gertrude Pirnie signed a contract to purchase Milton and Ruth Kutzin’s house in Haworth, New Jersey, for $365,000. As security, the Pirnies provided a deposit of nearly 10 percent of the purchase price, or $36,000. The contract contained no clause regarding liquidated damages or forfeiture of the deposit in the event of breach. However, soon afterward, the Pirnies had buyer’s remorse and requested a return of the deposit, which the Kutzins refused.

The Kutzins sued the Pirnies for specific performance of the contract, and the Pirnies counterclaimed for return of their $36,000 deposit. While the case was pending, the Kutzins sold the house to another buyer for $352,500, and the Kutzins amended their complaint to seek only damages. The Pirnies argued that the contract had been validly rescinded. The Kutzins argued that the parties had a binding contract and that the Pirnies breached it.

The trial court agreed with the Kutzins but found they only suffered $17,325 in damages as a result of the breach. This amount represented the difference between the contract price and sale price, as well as various carrying costs for the period between the planned sale and actual sale. Thus, the trial court ordered the Kutzins to pay the Pirnies $18,675 in restitution, or the difference between the $36,000 deposit and the $17,325 in damages.

The Kutzins appealed, believing they were entitled to more damages, and the Pirnies cross-appealed, arguing they were entitled to a return of the entire deposit. The court of appeals reversed and held that, because the $17,325 in damages was less than the deposit, the Kutzins could retain the entire deposit, but not more, as damages. The Pirnies appealed, and the New Jersey Supreme Court agreed to hear the case.

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