Withholding Monies Owed on Unrelated Project Constitutes Material Breach

Vinen Corp. v. Alan W. Nau Contracting, Inc., 557 A.2d 1056, 232 N.J. Super. 589 (N.J. Super. Ct. App. Div. 1989)

In this case, the court looked at an action by a contractor against the construction manager for breach of contract for withholding monies from payment that were owed on an unrelated project.  The defendant entered into a contract with the property owner to act as construction manager on a shopping center construction job.  Subsequently, the defendant entered into a subcontract with the plaintiff to act as the site contractor for the project.  During the course of construction, the plaintiff discontinued performance because the defendant withheld $11,000.00 from payment to the plaintiff for monies owed by the plaintiff to the defendant on a different project.  The defendant also insisted that the plaintiff sign a release of lien and threatened that failure to do so would result in defendant’s refusal to pay plaintiff any of the money it was owed for work up to that time.  The plaintiff filed suit for breach and defendant filed a counterclaim.  The court found that the withholding of money constituted a material breach and that the plaintiff was entitled to discontinue performance and was not liable for breach.