Negotiations were held between a seller of an apartment and a potential purchaser. At the last moment the seller withdraw and canceled the transaction after discovering that it will be subject to land betterment tax. The potential purchaser sued for damages.
The Court held that a party that did not act in an acceptable manner and in good faith owes the other party compensation for the damage caused to it as a result of the negotiations or following the execution of the contract. In this case, the seller refused to sign the agreement after it had already been edited and amended at her request, just because she realized that it erred as to the feasibility of the transaction due to liability for payment of betterment tax. Thus, she must pay compensation for the damage caused to the potential purchaser.