While a breach of contract may seem like a remedy for many people feeling injured, contracts in New Jersey have very specific requirements in the formation of them. While we have discussed contract defenses before, the first step is often determining whether a contract was actually entered into.
What Makes a Contract?
In New Jersey, a legal definition of a contract has very definite terms. The parties must show the following: (1) an Offer; (2) Acceptance of the Offer; (3) Consideration; (4) Mutual Assent to be Bound; and (5) Reasonably Certain Contract Terms. See N.J. Jury Instr. Civ. 4.10C. If a contract is missing any of these specific requirements, the entire contract may be considered null without the parties being required to perform their promised obligations. If the injured party can show that these elements exist, however, the contract will be binding, and the parties will be responsible for their agreed upon parts of the contract.
Under New Jersey law, an offer must (1) be communicated to the other party (the “Offeree”); (2) communicate to the other party that an offer is being made that may result in a binding contract; (3) and contain definite terms for the other party to reasonably believe that its acceptance would form a contract. While this may seem complicated, this essentially means the first party must communicate to the other that an offer to form a binding contract is being made. For example, if Alice tells Jim she paints houses for $500, that is likely not enough to have been an offer. However, if she tells Jim she would paint his house for $500, that is an offer.
Next, a party accepts an offer in New Jersey when it has actual knowledge of and agrees to the terms of the contract, and the acceptance is clear to both parties. This means the party accepting the offer needs to know the details of the contract for the terms to be binding. The first party may revoke that offer before acceptance, but once the offer is accepted it cannot be revoked. Continuing the above example, if Jim says $500 sounds reasonable, that is not an acceptance. If Jim states that he wants her to paint the hoes, and asks when she can start, that would likely be considered acceptance.
Third, there needs to be some sort of consideration. This is where issues usually will arise from. In New Jersey, consideration is a “bargained for exchange of promises or performance that may be an act, a forbearance, or an agreement to create, modify, or destroy a legal relation.” (Sipko v. Koger, Inc., 214 N.J. 364, 380 (2013). What this really means is that both parties must be contributing to this contract. It can include a benefit or a detriment, but both parties need to have an action in the contract. Courts will not usually weigh whether consideration is valuable enough, only whether it exists. Continuing the above example, Alice’s consideration would be painting the house. Jim’s consideration would be payment of the $500.
Fourth, there needs to be mutual assent and intent to be bound. This just means that the parties must agree to all the material or essential terms to the contract, and agree to perform their obligations under the contract. Jim and Alice would likely want to form a written agreement, though that is not always necessary. The written agreement would then be signed by both parties stating they intend to perform their end of the contract.
Finally, the contract’s terms need to be certain. This means that the terms need to be sufficiently clear so that what each party should, or should not, do may be determined with reasonable certainty. Jim and Alice would likely include various terms, such as the color of the paint, time to complete, and likely some insurance identification to conform with the New Jersey Consumer Fraud Act.
Are All Contracts Required to be in Writing?
While not all contracts in New Jersey are required to be in writing, certain ones must. The following types of contracts must be in writing to confirm with the New Jersey Statute of Frauds:
- A Prenuptial agreement made after February 19, 2007
- A loan, grant, or extension of credit of more than $100,000 made by a person in the business of lending or arranging for the lending of money or extending credit, including leases where the lease is the primary method of obtaining financing
- A creditor’s agreement not to exercise any contractual remedies where the amount owed exceeds $100,000
- An agreement by one party to a non-marital relationship to support the other party during the relationship or after its termination, if both parties have independent legal advice
- Contract for the transfer of real party, unless the transferee either (1) possesses the real estate and paid all or part of the consideration or (2) has reasonably relied on the transfer’s effectiveness to the transferee’s detriment
- Leases of more than three years
- A promise to be liable for another person’s obligations
- Real estate broker commissions
While the above contracts need to be in writing to conform to the New Jersey Statute of Frauds, there may still be equitable relief an injured party may be entitled to, even if the contract was not in writing.
Quasi-Contracts
Even if the agreement in question is missing certain requirements listed above, courts may still find a contract was made. Obligations can be implied by New Jersey contract law, which will give the injured party remedies similar to a contract. This will allow for equitable relief, rather than a legal remedy. Three specific terms are important here. “Promissory Estoppel;” “Quantum Meruit;” and “Unjust Enrichment.”
Promissory estoppel is similar to a contract in that it requires a promise that was definite and clear; the party made the promise expecting the other party would rely on it; the other party justifiably relied on it; and the justifiable reliance caused identifiable loss. Unlike fraud, there is no requirement that the promising party intended to deceive the injured party.
Quantum meruit comes from a situation where the parties have a close enough relationship to a contractual one that the court will imply an enforceable agreement between them. The injured party must show that one of the parties performed service for the other in good faith; the other party accepted the services; the performing party reasonably expected payment; and the charges were reasonable.
Lastly, unjust enrichment is used when a party wrongfully retains a benefit without compensating the other party. Here, the injured party must show the other party received a benefit; it would be unjust to allow that party to receive the benefit without compensation; the injured party expected compensation; and the party receiving the benefit would be unjustly enriched.
In New Jersey, contracts and contract law can be difficult to navigate. It is important to speak with experienced contract law attorneys, like the ones at Scura, Wigfield, Heyer, Stevens & Cammarota, LLP. Contact us today for your free consultation.
