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Davidson Bros., Inc. v. D. Katz & Sons, Inc. - 274 N.J. Super. 159, 643 A.2d 642 (Super. Ct. App. Div. 1994)

Rule:

Enforceability of a covenant depends on its reasonableness, and that the principle of "touch and concern" is but one of the eight factors to be considered in resolving the reasonableness issue.

Facts:

Plaintiff corporation closed one of its supermarkets in a downtown area and then sold the property to a merchant, who then sold the property to defendant city. Defendant then leased the property to another company, which operated a supermarket at the location in violation of a covenant prohibiting the operation of a supermarket at that location contained in the contract of sale from plaintiff. In an action to enforce the covenant, the lower court held that the covenant was unenforceable against the defendant city. Plaintiff appealed.

Issue:

Is a covenant in a contract of sale that prohibited the use of a property for a supermarket enforceable?

Answer:

No.

Conclusion:

The court affirmed the judgment that held plaintiff corporation's covenant prohibiting the use of a property sold to defendant city for a supermarket was unenforceable. The court held that closing the supermarket caused difficulties and hardships on the downtown citizens, who lost the only opportunity to purchase food at a reasonably close location. Plaintiff's restriction impeded the relocation of another supermarket operation to the downtown area. This obstacle to remediation efforts by defendant city was so contrary to the public policies expressed in the New Jersey Urban Enterprise Zone Act, and similar acts, that it represented a scorched earth policy that under the circumstances was unreasonable and unenforceable.

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