In a recent decision, the New Jersey Supreme Court addressed a significant issue regarding the contractual relationship between municipalities and residents in the case of Mark Cerkez, et al. vs. Gloucester City, New Jersey, et al. (A-0661-23/A-0745-23). The court examined whether municipalities have an implied contractual relationship with residents concerning the distribution of metered potable water.
The plaintiffs argued that such a relationship exists, citing older case law that supported the notion of a contractual bond between residents and their towns for water services. They claimed that the water supplied contained high levels of contaminants, which constituted a breach of contract. On the other hand, the defendants, Gloucester City, and other municipalities contended that the relationship was not contractual but rather governmental in nature.
The court ultimately sided with the defendants, stating that under current governance frameworks, potable water is a public resource held in trust for the people. This perspective implies that municipalities distribute water for governmental purposes, not as private entities selling water for profit. Consequently, the charges residents pay for water do not establish a contractual relationship but are merely fees for a governmental service.
Furthermore, the court noted that the plaintiffs’ claims, although framed in terms of contract law, essentially resembled a warranty of fitness cause of action. This type of claim is explicitly precluded under the Tort Claims Act (N.J.S.A. 59:9-2(b)). Therefore, labeling the issue as a contract dispute does not alter its fundamental character or the nature of the relationship between municipalities and residents.
This decision underscores the court’s view that municipalities act in a governmental capacity when providing water services, and it shields them from contractual liability claims related to water quality.
This ruling has significant implications for similar cases where residents might seek to hold municipalities accountable for water quality issues under contract law, reaffirming the public trust doctrine’s application to public resources like water.
