Articles Posted in Business Law

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New Jersey’s Consumer Fraud Act provides some of the strongest consumer protections in the United States.  These protections have long been extended to consumers which tow-truck-309953__340-300x176are business entities.  It is one of the strongest of New Jersey’s business law.  However, the parameters of when a business, as opposed to a person, was acting as a “consumer,”have yielded conflicting decisions.  The Supreme Court of New Jersey has recently issued an important decision affirming business to business consumer fraud, and establishing a test to clarify when a business should be considered to be a “consumer,” and when goods are considered “merchandise” invoking the protection under the Consumer Fraud Act.

The All The Way Towing Case: Background

On January 24, 2019, the New Jersey Supreme Court issued its opinion in the case of All the Way Towing, LLC v. Bucks County International, Inc.  In that case All the Way Towing (ATW) , a limited liability company in the towing business, ordered an “International” brand all wheel drive truck from Bucks County International, Inc. (BCI), with an autoloader tow body manufactured by another company, Dynamic Towing Equipment and Manufacturing, Inc. (Dynamic).  ATW spent several months negotiating the price and specifications with BCI’s salesperson, and then placed a $10,000 deposit.

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rules-1339917__340-300x231Very often, a person or business will want to confer a benefit on a third party but will not be able to do so itself, for a variety of reasons.  So then, to make sure the benefit will be conferred, it will enter into a contract with a person or business which has the ability to confer the benefit.  The question, then, is what rights does the third-party beneficiary have?

Let’s say Sam wants to build a deck for his friend Joe’s house, but Sam is an incompetent carpenter. So Sam signs a contract with Acme Building Contractors, Inc., in which Acme agrees to build a deck on Joe’s house, and Sam agrees to pay Acme $5000.  Sam pays Acme in full but it never builds the deck, and then Sam dies.  Now Acme has $5000 and Joe doesn’t have a deck.  Does Joe have any remedies to enforce Sam’s contract with Acme?  That all depends on whether Joe can be considered a third-party beneficiary under New Jersey law.  The basic answer is yes, if Sam and Acme intended Joe to be a third-party beneficiary.

New Jersey Law Expressly Allows Third-Party Beneficiaries to Enforce Contracts

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tax-739107__340-300x200New Jersey’s Supreme Court adopted new rules which became effective September 1, 2018. These rules amend New Jersey’s Rules of Court to make the litigation of complex business law matters more efficient. This article discusses some of the major changes the new rules have brought about.

Background

In 2000, the Supreme Court revised the discovery procedures in New Jersey’s Court Rules for civil cases. These amendments were adopted because the courts in various counties had developed different discovery procedures. The Supreme Court’s aim was to standardize these rules so that litigants would get the same level playing field in every county throughout the state. However, in adopting three basic case tracks, the Court may have gone too far in limiting judges’ ability to manage complex business law cases. The Supreme Court therefore explored establishing a separate track for complex commercial cases.

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italian-food-2361054__340-300x200Before you enter into an agreement to purchase a franchise, it is vital to review and understand the documents you are being required to sign. You will be required to execute the following documents:

1) The Franchise Disclosure Document, previously known as the Uniform Franchise Offering Circular, provides information regarding the franchise’s history, the nature of the business and the products or services it provides, as well as the costs and fees imposed the franchisor, the operational requirements, and historical financial information.

It will, of course, state that past success does not guarantee future success, but it should give you details of the business up to the present date. It must include mandatory disclosures pursuant to the Code of Federal Regulations, Volume 16, Part 436, see The Franchise Rule Compliance Guide.

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confidential-1726367__340-300x300Businesses entering into negotiations with other businesses or persons often need to give the other party confidential information.  For example, a business will need to give a potential buyer information regarding its revenue, expenses, customers, formulas, payroll, vendors, and pricing so that the potential buyer can formulate an offer during the due diligence period.  If the deal falls through the seller will rightly want to ensure that the buyer which backed can’t use this information to compete with it or disclose it to competitors or customers.

Fortunately, New Jersey business law gives such companies two important tools to protect their information: The New Jersey Trade Secrets Act and enforceable confidentiality agreements (also known as non-disclosure agreements, or “NDA’s”).

The New Jersey Trade Secrets Act

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baltimore-city-hall-1482793__340-300x205Montclair State University has spent the last decade or so trying to obtain approval from the County of Passaic and the City of Clifton to construct a roadway which would intersect with a county road. Both the County and the City raised concerns about the proposed development and Montclair State made significant efforts in an attempt to address those concerns. In 2014, Montclair State submitted an application to Passaic County for a permit to install traffic controls at the intersection.

Montclair State did not seek permission from Clifton or Clifton’s Land Use Board based upon belief that, as a state organization, it was not subject to local regulations. Montclair State asserted this position largely based upon the 1972 New Jersey Supreme Court case of Rutgers v. Piluso.

The question in the Rutgers case was whether Rutgers University was subject to zoning ordinances of the town where it was located, Piscataway. Piscataway had an ordinance which restricted the number of matriculating students’ “family dwellings” Rutgers could have. When Rutgers sought to build more, the town denied the request, citing the ordinance. Rutgers then brought a suit seeking a determination from the court that Rutgers was not subject to local zoning ordinances because it was an instrumentality of the State of New Jersey.

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New Jersey has been trying to legalize sports betting for years. One of the primary hurdles for that legalization has been the federal Professional and Amateur Sports Protection Act (PASPA).  That law, enacted by Congress in 1992, make it unlawful for a government entity to authorize, operate, etc., gambling on competitive games in which athletes participate.  PASPA – also known as the Bradley Act – excluded Oregon, Delaware, Montana, and Nevada from its sports betting prohibitions. New Jersey (and any other state which had licensed casino gambling) had a 1-year window to pass laws permitting sports betting.  However, New Jersey did not pass such a law within that window of time.

Later, in 2011, New Jersey voters approved an amendment to the state constitution to permit the legislature to create laws to permit sports gambling. (Sports gambling would still not be permitted for college sporting events taking place in the State of New Jersey or involving a New Jersey team.)

In 2012 the first Sports Wagering Act was introduced to permit betting on sports at racetracks and casinos.  That Act was challenged by virtually all major sports associations (NFL, MLB, NHL, etc.) and ultimately struck down by the District Court as violating PASPA.

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Enforceable contracts are the bedrock of a strong economy. If contracts were not enforced, parties could not rely on the other side performing because there would be no remedy if they breached. Therefore, commerce would break down. Enforceable contracts are so important to the economy, in fact, that the freedom to contract is included in both the New Jersey and United States Constitutions. Before a contract can be enforced, however, the parties and the reviewing court must figure out what the contract means. When the terms are clear this normally isn’t a problem. However, when the contract is ambiguous, or even just a part of it is unclear, the question becomes what evidence may be admitted to determine the meaning and intent of the contract.

As I’ve written earlier, New Jersey courts generally adhere to the “parole evidence rule,” which holds that when there is a clear, unambiguous contract, extrinsic, or external, evidence beyond the four walls of the contract is inadmissible to prove what the contract means. However, in New Jersey business law, the exceptions come close to swallowing the rule. Indeed, the New Jersey Supreme Court held as far back as 1953, in the case of Atlantic Northern Airlines v. Schwimmer, that all evidence is relevant if it will assist the trier of fact in determination what the parties to a contract intended and what the contract means – even if that evidence is extrinsic.

The question, then, is what sort of extrinsic evidence is admissible? In the case of commercial contracts, one source of evidence is custom and usage.

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McLaughlin & Nardi’s New Jersey construction attorneys represent owners, contrhouse-construction-3370969__340-300x197actors and building suppliers in the prosecution and defense of construction lien claims.

As discussed in McLaughlin & Nardi’s overview of construction liens, they can be powerful tools for construction contractors, subcontractors, and suppliers who are experiencing difficulties in getting paid for the work that they have performed.

However, when considering whether to proceed with filing a construction lien for either a commercial or residential project, it is important to know that the contractor (“claimant”) act promptly once it starts to experience payment issues.

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laptop-3175111__340-300x200New Jersey Courts have followed the Parole Evidence Rule since at least 1882.  The Parole Evidence Rule holds that outside (or “extrinsic”) evidence is not allowed to alter the terms of a contract – in other words, the Parole Evidence holds that, the meaning of a contract is contained within its own four walls.  Unlike most rules with the word “evidence” in it, the Parole Evidence Rule is not actually part of the Rules of Evidence.  In fact, it is not really an evidence rule at all.  Rather, it is a substantive rule of law which holds that once the parties sign a contract, their prior negotiations are irrelevant because they have selected the terms of their agreement.

The first requirement for the Parole Evidence Rule to be invoked is that there must be a written contract – the Parole Evidence Rule only applies to agreements which have placed into a written contact.  Second, the written contract must be intended as the parties’ final agreement.  While this may seem self-evident, in the early stages of commercial transactions parties often use “letters of intent” which are not intended as the final agreement, but only as the broad outlines of how the parties foresee their eventual agreements turning out.  Finally, the contract must be a “fully integrated” agreement.  This means that the contract must cover all parts of the transactions, not just some elements; the Parole Evidence Rule does not bar extrinsic evidence in the interpretation of “partially integrated” contracts.

Limitations on Application of the Parole Evidence Rule