Compensatory damages are designed to put the injured party in as good a position as he would have had if performance had been rendered as promised.
Plaintiff buyers prevailed in a suit for specific performance, when defendant seller was unable to perform because of a defect in title. The appellate court held that N.J. Stat. Ann. § 2A:29-1 was declarative of the general common law right to recover consequential damages for breach of a contract and that the statute modified the preexisting law, which limited plaintiffs' to recovery of his deposit upon a defendant's breach due to a defective title. On appeal, the court modified the order of the appellate court and remanded the case back to the trial court.
Is plaintiff entitled to compensatory damages?
The court held that where defendant agreed that title would be marketable, defendant's liability depended upon his breach of that promise. Consequently, plaintiffs were permitted to recover compensatory damages when defendant breached his promise. The court held that the measure of damages was the fair market value of the property at the time defendant failed to comply with the judgment of specific performance. The court also held that plaintiffs were entitled to their expenditures for the survey, search, and counsel fees for services rendered in preparation of the aborted closing.