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New Jersey Business Law Decision Examines Requirements for an Enforceable Contracts

Contract drafting and negotiation is one of the most important aspects of New Jersey business law.  Contracts govern the relationship between business parties.  Therefore, it is vital to ensure that a contract embodies the terms which the parties bargained for, and protects their interests.  And it must meet all the legal requirements for contracts to be enforceable.signature-3113182__340-300x200

The Appellate Division recently explored those requirements, and the consequences which follow when they are not met, in the case of Tyler at First Street, LLC vs. Yengo.



The facts were complicated, but can be simplified for our purposes.  This case involved a dispute over the purchase of property in Jersey City.  Several – but not all – of the parties involved signed a handwritten document purportedly setting out the terms of the transaction.  It was numbered “page 1 of 3” and “page 2 of 3,” but page 3 was missing.  It allegedly contained a list of assets to be used as collateral.  It listed a purchase price of $2,600,000, and a schedule of payments.  It also stated that the contract was contingent upon the cancelation of an existing contract for sale of the property.  It was signed by a witness, an attorney who signed but did not specify who she signed for and did not have a written power of attorney authorizing her to do so, and Yengo, the owner of the original buyer under contract to purchase the property which was supposed to cancel the original contract.  A fourth signature line was blank.  For surrendering its interest, Yengo’s company, Second Street Development, was to receive certain payments and an unspecified amount of profits from the sale of the developed units.  Several payments were made, but then stopped.  The original contract to purchase the property was never cancelled by Yengo.


The Trial Court Litigation

Yengo and Second Street sued for breach of contract.  Complicated litigation ensued, in which multiple parties were involved.  Eventually a twelve day bench trial was held in the General Equity Part of the Chancery Division in the Superior Court of New Jersey in Hudson County.  The key questions were whether the handwritten document constituted a contract, and if so whether it was it breached.

The Chancery judge found that there was no contract and therefore ruled against Yengo and Second Street.  Yengo and Second Street appealed to the Appellate Division of the Superior Court.


The Appellate Division Affirms

The Appellate Division affirmed the trial judge’s decision.

First, the Court explained that a contract requires a meeting of the minds between the parties on all material terms.  Here, there was none because many of the terms were unclear, missing or not addressed.  For instance, because of the missing page the property to be given as collateral was not listed (and New Jersey law requires that contracts for real estate be in writing).  It did not explain the amount or formula for determining the profits Yengo was supposed to receive.  Moreover, the handwritten document did not even have the signatures of all the parties which Yengo claimed were bound by it.

Additionally, the attorney’s signature was not valid.  If someone is to sign a contract for the sale of real estate for another, a written power of attorney is required, and no such power of attorney was ever produced and the attorney was not even sure she had one.

Moreover, even if there was a contract, it was contingent on Yengo and Second Street terminating their contract for the purchase of the property, and they never did so.

In short, the Appellate Division found that there was no contract, and even if there was it was contingent on Yengo and Second Street terminating their contract.  They never did, and therefore they could not enforce the contract.


The Bottom Line: Make Sure You’ve Met the Requirements of a Valid Contracts

To be a binding contract, an agreement must meet all the legal requirements required for valid contracts.  If an agreement does not meet these requirements, it is not a valid contract and courts will not enforce it.   Moreover, while many oral contracts are enforceable if proven, the New Jersey Statute of Frauds requires that contracts for the sale of real estate must be in writing. The Appellate Division explained these requirements.

A written contract is formed when there is a `meeting of the minds’ between the parties evidenced by a written offer and an unconditional, written acceptance.  A contract arises from offer and acceptance, and must be sufficiently definite that the performance to be rendered by each party can be ascertained with reasonable certainty.

Likewise, if a  person or business is going to have someone else sign a contract under a power of attorney, particularly contracts for the sale of real estate, the power of attorney must actually be in writing and meet the legal requirements for powers of attorney for their signature to be valid.

So don’t mess around.  Maybe Yengo saved a little money by not having an attorney draft or negotiate the contract, but he lost hundreds of thousands of dollars because the contract didn’t meet the legal requirements to be enforceable.


Contact Us

McLaughlin & Nardi, LLC’s business attorneys represent people and businesses in all aspects of New Jersey business law, including contract drafting, negotiations and litigation.  Call us at (973) 890-0004 or fill out the contact from on this page to schedule a consultation with one of our New Jersey business lawyers.  We can help.

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