June 6, 1984

A front-page picture caption Thursday with an article about flooding in New Jersey incorrectly identified the area from which people were leaving their homes by boat. It was in an area of Lincoln Park flooded by the Pompton River.

''Our sovereignty was violated and we reacted, as we said we would all along, in a defensive manner.

The Continental Group, the diversified can company, has spent several years reshaping itself. In 1977, it acquired several insurance companies, and two years later, an oil and gas company. Last year, it shed part of its paper operations and bought back a large chunk of its stock. Finally, just when management seemed happy with its campaign of redeploying assets, Sir James Goldsmith, the British financier, has informally offered to buy Continental for about $50 a share, or $2.1 billion.

Two Saudi Arabian fighter pilots shot down two American-built Iranian F-4 fighters today, Saudi and United States officials said. The Saudi pilots were flying American-built F-15's and had help from United States aerial tanker planes and surveillance planes, they said. In London, President Reagan was said to be concerned that the Saudi air action could intensify the fighting. In Kuwait, Western and Arab officials described the aerial fight as a widening of the conflict. Iran said 600 people were killed in an Iraqi air raid on the town of Baneh, but did not make any immediate comment on the aerial clash with the Saudis. (Page A3.)

Key legislators have agreed that New York should require motorists to wear seat belts. They say that they are committed to passing such legislation in the next few weeks. It would be the first such law in the country. Important details remain to be worked out, including the penalties for failure to observe the law and precisely who would be required to buckle up. The measure would not apply to vehicles that are not required to have seat belts, such as cars built before 1966 and school buses.