Articles Tagged with “commercial transactions”

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A letter of intent is a document executed generally by businesses to outline the basic terms of a commercial transaction, whether that be a complicated sale of goods or services or a real estate transaction. A letter of intent is entered into in the early stages of negotiation, when major obligations and expectations have been agreed upon, but specific details have not yet been determined. Letters of intent are useful in negotiating complex commercial transactions since they can provide a basic foundation of the understandings between the parties prior to taking part in lengthy and expensive research, investigations, financial review, environmental inspections, or other due diligence that must be conducted prior to the execution of a formal contract.

Perhaps the most important concern in drafting a letter of intent is whether the parties intend for that letter, or any sections of it to be binding. If the letter of intent resembles a contract too closely, under New Jersey contract law it could be considered an enforceable contract when the parties have actually yet to finalize the details of their agreement. That result could potentially leave one party unable to avoid a transaction that, following further negotiations or due diligence, proves to be unexpectedly disadvantageous. However, if the parties want the letter of intent to be binding, it is important to ensure that this intent is clearly set forth and agreed upon in the language of the document.

In many cases, letters of intent include both non-binding and binding terms which should be clearly delineated in the document itself. Certain sections of a letter of intent, such as a confidentiality or non-disclosure clause, will generally be considered binding because they are immediately applicable at the start of the negotiations. For instance, if the parties need to exchange information during the negotiations which is private, includes trade secrets, or is otherwise confidential in nature, it only makes sense that the confidentiality clause in the letter of intent be immediately binding upon the parties. Likewise, provisions such as those which promise exclusive rights to negotiate are also more likely to be binding since they too are immediately applicable while negotiations are continuing.
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Under New Jersey law, anyone authorized to write a check can issue a stop payment order. A stop payment order tells the bank that it should not honor a check already written and given to someone, but not yet cashed.

In New Jersey, a stop payment order is effective for six months. However, if the stop payment order was verbally conveyed to the bank, it will lapse after fourteen days unless the customer confirms the order in writing within the fourteen day period. Then the customer may extend it for another six months by submitting a written request within the first six months.

However, New Jersey law does not require check cashing companies to investigate every check for possible stop payment orders. For instance, the Superior Court of New Jersey ruled that any claim that a check cashing company failed to conduct due diligence is unlikely to succeed because it is commercially unreasonable for companies to inquire about possible stop payment orders on every single check. It is enough for the company to see that the amount is small, the person has cashed similar checks from the same source, the person shows identification, and there are sufficient funds in the account.

If there is something suspicious about the check, the law may require the check cashing company to call the bank or check-writer to ensure it is legitimate. However, without some clear sign of fraud or other suspicious circumstances (for instance if a person attempted to cash a check for a large sum of money or the names or amounts had been erased or altered) the company has no obligation to confirm the check’s validity and may proceed to cash the check.

If there is not clear fraud, a check may be cashed even after a stop payment order is properly issued. After the check cashing company cashed the check, however, the bank would refuse to pay it because of the stop payment order. However, this does not leave the check cashing company without recourse. The company may actually sue the writer of the check for payment – regardless of the stop payment order.
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