## Facts

- Home buyers contracted with a corporate developer to purchase a lot and have a house constructed for $651,488.70.
- The buyers paid a $79,027.40 deposit (described as 10% of the purchase price plus part of extras).
- The contract included a liquidated damages clause authorizing the seller to keep the deposit if the buyers defaulted; individual defendants guaranteed the corporate obligation concerning return of the deposit.
- For purposes of summary judgment and appeal, the parties proceeded on the assumption that the buyers breached the contract and that the seller suffered no actual damages.
- After the breach, the developer resold the property for $845,484, substantially more than the original contract price; the trial court found no net loss to defendants after considering claimed costs.
- The buyers sued for return of the deposit; the trial court granted summary judgment ordering return of the deposit and awarded counsel fees to the buyers.

## Issues

1. Whether a corporate developer may retain a substantial deposit as liquidated damages in a residential consumer contract when the seller is assumed to have suffered no actual damages from the buyers’ breach.
2. Whether the trial court’s award of counsel fees to the buyers was supported by a proper basis in the record.

## Decision

- Affirmed the order requiring return of the $79,027.40 deposit.
- Declined to enforce the liquidated damages clause on the agreed assumption that no damages flowed from the breach and the seller realized no loss.
- Reversed the award of counsel fees.

## Legal Principles

- A liquidated damages clause is enforceable only if it reflects a reasonable forecast of just compensation for anticipated harm and does not operate as a penalty.
- In residential consumer transactions between individual buyers and a professional developer, courts closely examine deposit-forfeiture clauses for fairness and to prevent oppressive forfeitures.
- When the seller sustains no loss—particularly where resale yields a gain—retention of a substantial deposit may be treated as punitive and therefore unenforceable.
- Counsel fees may not be awarded absent a valid contractual, statutory, court-rule, or clearly established equitable basis supported by the record.

## Conclusion

The court required the developer to return the buyers’ deposit because enforcing the liquidated damages clause with no actual loss would impose a penalty in a consumer home-sale setting, and it vacated the counsel-fee award for lack of an adequate legal basis.


Nohe v. Roblyn Dev. Corp., 296 N.J. Super. 172, 686 A.2d 382 (App. Div. 1997)