On appeal from the Superior Court, Law Division, Essex County.
Pressler, Brody and Cohen. The opinion of the court was delivered by Cohen, J.A.D.
Plaintiff operates an auto body repair shop in Newark. Defendant installs and services burglar alarm systems. One of its systems was installed in plaintiff's premises. After an undetected break-in, plaintiff sued defendant for its losses, charging breach of contract, negligence and "gross and wanton negligence." A second count was abandoned at trial.
The break-in occurred during the term of the third annual contract between the parties. At the beginning of the first contract, defendant sold and installed sensitive listening equipment in various parts of plaintiff's shop at a cost to plaintiff of $800. Defendant then provided continuous central station monitoring of the listening equipment during plaintiff's off hours so that it could detect any sounds of a break-in and immediately alert plaintiff and the police. The monitoring charge was $50
per month. Plaintiff additionally paid the telephone company's charges for a trunk line connecting its premises with the monitoring station.
The evidence at trial permitted the conclusion that the break-in occurred about one and a half hours before defendant recognized and reported it; that the burglars first broke a substantial amount of skylight glass and then gained entry by smashing through a block wall with a sledge hammer; that a wall of metal shelves holding paint cans was thrown over and that a good deal of noisy activity took place over a long period of time in the shop. Defendant's monitoring employee failed to detect the break-in because she turned down the sound volume on the listening equipment to avoid hearing sounds she considered non hostile, including the barking of plaintiff's guard dog, which defendant's employees had previously adjudged overexcitable. She was finally awakened to the true situation only when an independent perimeter alarm was set off by the burglars' raising an overhead door to drive away a customer's Cadillac.
In answer to the court's special verdict questions, R. 4:39-1, the jury found that defendant failed to perform its contract obligations reasonably, diligently and competently; that losses of the nature incurred by plaintiff were foreseeable as a result of a contract breach, and that losses were incurred by plaintiff as a result of defendant's failure to perform. The jury was not asked if defendant was guilty of the complaint's charge of "gross and wanton negligence." The jury was not asked to fix the quantum of damages. Instead, the court entered judgment for $250, for reasons which occasion plaintiff's appeal.
Each of the three yearly contracts between the parties contained a provision limiting defendant's liability to $250. Among other things, they said:
If Sonitrol should be found liable for loss or damage due to the failure of its services in any respect, even if due to Sonitrol's negligence, its liability shall be limited to a sum equal to ten percent of the annual monitoring charge for the premises or $250 whichever is greater, as liquidated damages and not as a penalty, . . . .
The first two yearly contracts were accompanied, however, by a separate guarantee. It promised that, if there was an undetected and unreported forcible entry, defendant would make good plaintiff's losses and damages up to $5,000. Partway through the second contract, defendant revoked the guarantee. When it came time to sign the third contract, plaintiff asked for the elimination of the provision limiting defendant's liability in view of the withdrawal of the $5,000 guarantee. Defendant declined to remove the provision, and plaintiff nevertheless signed the contract. It was satisfied with defendant's services and was mindful of its own $800 investment in equipment, which it was afraid would be rendered useless by ending defendant's services.*fn1
The clause purports to be a liquidated damage clause, justified, according to its own language, ...