## Facts

- Home purchasers Milton and Sydelle Wolf contracted with Marlton Corporation to buy a newly constructed house in the developer’s residential tract for $24,500.
- The contract required a $2,450 payment at signing and an additional $2,450 payment when the house was “closed in,” with the balance due at settlement via cash and mortgage financing.
- The contract included a clause allowing the seller, upon the buyer’s failure to make required payments or settle, to retain sums paid either toward the price or as compensation for the seller’s charges and expenses, and to treat the contract as void.
- Marlton completed the “closing in” of the house around June 1957; the Wolfs did not make the second required payment, asserting they had not been personally notified that the house was “closed in.”
- During the construction period, the Wolfs sought release from the contract through counsel; Marlton’s president testified that the Wolfs’ attorney threatened that, if not released, the Wolfs would take title and resell to an “undesirable” purchaser to harm the tract.
- Marlton treated the contract as materially breached/repudiated by the Wolfs, refused to complete the sale, and retained the $2,450 deposit under the forfeiture clause; the house was later sold to another buyer.
- The Wolfs sued to recover the deposit; after a bench trial, the county court found the builder improperly refused to perform (largely based on an implied duty to give notice of “closing in”) and ordered return of the deposit.

## Issues

1. Whether a threat to perform a lawful act (resale) with the purpose of injuring the other party’s business can constitute “wrongful” pressure amounting to duress in a moral or equitable sense.
2. Whether such a threat, if made and reasonably believed, may operate as an anticipatory repudiation justifying the developer in treating the contract as terminated.
3. Whether the trial court was required to make explicit findings on the making, meaning, intent, and reasonable reliance on the alleged threat before deciding whether the seller could retain any portion of the deposit as damages.

## Decision

- The Appellate Division reversed the judgment for the Wolfs and remanded for further proceedings.
- The court held that duress and repudiation may be based on a threat to do a lawful act where the threat is wrongful in a moral or equitable sense, including a bad-faith threat made to coerce by deliberately inflicting harm.
- The court ruled that the trial court’s focus on notice of “closing in” did not resolve the central dispute and that essential factual findings were missing.
- On remand, the trial court was directed to determine whether the alleged threat was made, its substance and seriousness, whether it was intended, whether Marlton’s president actually and reasonably believed it would be carried out, and then to decide breach/justification and the amount (if any) of deposit retainable as compensation.

## Legal Principles

- Duress can arise from threats that are not illegal if the pressure is wrongful in a moral or equitable sense and is used coercively in bad faith.
- A contracting party’s stated intent to use contractual or property rights to injure the counterparty’s business, rather than for legitimate self-interest, can be treated as wrongful conduct for duress analysis.
- Anticipatory repudiation may be found where a party clearly indicates an intention to perform in a manner inconsistent with contractual obligations, including the implied duty of good faith and fair dealing.
- Whether an alleged threat justifies termination depends on both subjective belief (actual reliance) and objective reasonableness (reasonable grounds to treat the threat as real).
- Contractual deposit-retention clauses require a determination of entitlement and damages grounded in findings on breach/repudiation and compensable loss.

## Conclusion

The appellate court required a fact-specific determination of whether the purchasers, through counsel, wrongfully threatened to exercise lawful rights in bad faith to harm the developer, and whether that threat amounted to duress and anticipatory repudiation justifying termination and retention of some or all of the deposit; it therefore reversed and remanded for explicit findings and a damages determination.


Wolf v. Marlton Corp., 57 N.J. Super. 278, 154 A.2d 625 (N.J. Super. Ct. App. Div. 1959)