Water service in New Jersey municipalities is provided by a combination of public and private operations. While customers of private companies have the ability to seek damages in a breach-of-contract lawsuit when their water is contaminated, there have been conflicting rulings as to whether a municipal or county supplier can be sued in the same way. The Appellate Division reviewed two appeals related to this subject in order to create a single, coherent standard.
The three-judge panel held that the County and Municipal Water Supply Act does not establish a contractual relationship between the government body and the party receiving water service. According to their decision, water distribution by municipal and county suppliers is not a commercial transaction but a governmental function.
There are several factors the court used to determine that the water service was a public trust, rather than a commercial operation, such as:
-
Lack of rate bargaining — Under the County and Municipal Water Supply Act, the government entity unilaterally sets the rates. This is not indicative of a typical contractual relationship.
-
Lack of an actual contract with residents — In the subject cases, the Gloucester City and Brooklawn municipalities did not submit any contract terms to residents or require any approval before providing water. This is distinguishable from an example where a town ordinance discussed the sale of water to residents and included contract-type language.
-
Lack of profit motive — Even though the government might charge a fee to defray the costs of providing water, that does not create an implied contract. Here the panel held that the rate structure was established to address acquisition, construction and operation expenses.
While the ruling bars breach-of-contract claims due to the lack of an implied agreement, victims of contaminated water do have options even if their supplier is a municipality or county. Public utilities must still comply with federal and state regulations governing water quality. Consulting with a knowledgeable civil litigation attorney can help you determine if relief is available through a tort claim or some other type of action.
Frieri Law Group in Cranford represents clients throughout New Jersey, including Union, Morris and Somerset counties, in various types of civil litigation matters. Please call 908-883-3390 or contact us online to discuss your potential claim with an accomplished attorney.