1. Understanding Contract Law
2. Testing for Consideration
3. Common Misconception About Contract Law
4. What Must a Written Contract Include?
5. How Does Non-Written Agreement Come Into Existence?

You need to understand New Jersey contract law if you are signing a contract with someone in this state. A legally enforceable promise that is either written or verbal is considered to be a contract. In the case, Johnson and Johnson v. Charmley Drug Co., 11 N. J. 526,539 (1953), a contract arises when an offer is made and accepted voluntarily, resulting in an obligation that is enforceable by law.

Understanding Contract Law

Contract law gets a lot of attention in most civil court proceedings in New Jersey. In small claims court proceedings or in major commercial court proceedings, contractual disputes are almost always the underlying claim for legal action. For a contract to come into existence, an offer must be made by one party to another, and the other part must accept the offer.

A consideration must take place for a legal contract to exist. This means each party involved, must give up something of value.

In the case, Shebar v. Sanyo Bus. Sys. Corp. 111N.J. at 289 (adopting Restatement (Second) of Contracts $79 (1979)), the court ruled that once consideration is met, the promisor has no additional requirement of gain or benefit, loss or damage to the promisee, likeness in values exchanged, or mutually of obligation.

Testing for Consideration

This means that the only testing in court will be to determine if consideration is indeed present in the contract, regardless of how adequate the consideration appears.

The court will find the existence of consideration even if both parties receive a trifle of something. When an agreement takes place and both parties fully understand what the agreement involves, this is referred to as, meeting of the minds. In addition, a contract can only be enforceable if it is reasonably certain. In other words, there has to be a distinct offer, an acceptance of the offer, and a consideration. There can be no contract without consideration.

Common Misconception About Contract Law

It is a mistaken belief, that in order for a contract to be legally binding, it must exist in writing. If two parties agree to the rudiments of a contract, then it is considered legally binding. Although this is a fallacy, most people will still choose to use a written contract over a verbal contract, to avoid ambiguity.

Other than under the Statue of Frauds, oral or verbal contracts are just as binding and enforceable as a written contract. Evidence proving that a contract, in fact, took formation can be the biggest problem surrounding oral or verbal contracts.

What Must a Written Contract Include?

Written contracts must include certain elements to be considered enforceable, and may include various sections, such as an introduction, a section that defines the terms used within the contract, a section which states the purpose of the contract, obligations, warranties, guarantees and additional attachments. All the involved parties must acknowledge that they accept the terms of the contract by signing.

How Does Non-Written Agreement Come Into Existence?

A non-written agreement that comes into existence due to the relationship or circumstances surrounding the parties involved is referred to as an implied contract. An implied contract may exist without any actual verbal agreement as well. It is a contract that is assumed to exist because of actions of the parties involved. Therefore, a contract can be:

  • Express.
  • Implied.
  • Both.

For example, if one party distributes merchandise to another party on a regular basis, and in return receives payment for such merchandise, then it may be implied that a contract exists between the two parties.

When a party fails to honor the contract, this is often referred to as a breach of contract. In the state of New Jersey, the plaintiff is required to prove certain circumstances have taken place to establish a breach of contract.

First, the plaintiff must prove that a contract entailing certain terms and obligations was entered between the plaintiff and the defendant. The plaintiff must prove that the plaintiff, as agreed upon, met all obligations. Then, the plaintiff must prove that the defendant failed to meet the required obligations, causing a loss to the plaintiff.

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