Be Careful: Is Your New Jersey Business Agreement an Enforceable Contract?
Most people think they understand contracts. They envision a 25-page document filled with legalese and spaces to initial and sign on every page. Terms are agreed to and everything is settled. Yet, it is rarely that simple. Contracts are the lifeblood of the business world, but many business owners have misperceptions about what constitutes a legally valid contract. Being aware of the broad legal strokes regarding contracts is crucial for local business owners to ensure they do not enter into unfavorable agreements unintentionally and can enforce agreements if things go awry.
Is a Writing Required?
In a basic sense to be legally valid a contract only needs to be agreed upon by two (or more) parties and the parties need to provide consideration, or something of value, for the other person’s promise. A writing is not technically required to form a contract except in certain circumstances–but knowing what those circumstances are is vital. Countless business disputes continue to end in court with parties arguing over whether contract formation requirements were under the Statute of Frauds most real estate contracts, contracts that will not end until more than a year after they are formed, and promises to pay or guarantee the debts of another are required to be memorialized in writing. Under N.J.S.25:1-5(f) parties are also required to put any agreement for the loaning of more than $100,000 in writing.
In addition, in our state a contract for the sale of goods $500 or more is required to be in writing and signed by the party against whom enforcement is sought. The writing for the sale of goods may not need to be formal, as emails, letters, or notes might suffice. If legal disputes arise in these situations, the critical point will be whether the writing is signed by the proper party and indicates the terms of the agreement sufficiently. In other situations, even absent sufficient writing to meet the Statute of Fraud requirements, a party may be able to enforce a contract if unique circumstances are met—like if the goods at issue were specially designed for a buyer and not suitable for other purposes or if the goods were already paid for.
Offer and Acceptance
Of course, the vast majority of business agreements are in writing, and all prudent business owners ensure contract details are carefully understood. However, considering that a contract does not technically need to be in writing, it is important to understand when an agreement— even one not in writing—becomes legally binding.
The process by which parties make an agreement is called offer and acceptance. One party puts forward an “offer” and the other person extends their “acceptance” to finalize the contract.
The acceptance of an offer finalizes a contract and makes it binding (if accompanied by sufficient consideration).
In today’s business world there is frequently dispute about what constitutes an actual offer or acceptance. Offers are frequently revoked or modified, counter offers are made, parties wait too long to respond to an offer, market prices change during the wait, and countless other variables affect the simple extension of an offer and its acceptance.
Help with Contracts in New Jersey
It is easy for even experienced business owners to get lulled into sticky contractual situations unintentionally. Contract law has simple principles which easily get mired in complexity when applied to modern-day business practices. In our area, local business must be very careful to consult with a Burlington county business lawyer to ensure agreements entered into meet legal requirements and will be enforceable in court should something go wrong.