Key Takeaways

  • In New Jersey, contracts can be express or implied and either written or oral, with certain exceptions under the Statute of Frauds.
  • Essential elements of a valid contract include offer, acceptance, consideration, and mutual intent to be bound.
  • The Statute of Frauds requires specific types of agreements to be in writing to be enforceable.
  • Quasi-contracts may be recognized to prevent unjust enrichment when no formal contract exists.
  • Breach of contract remedies include compensatory damages, specific performance, and sometimes rescission.
  • Courts in New Jersey interpret contract terms by reviewing the plain meaning of language and the intent of the parties at the time of agreement.
  • Legal capacity, public policy, and proper subject matter also influence enforceability.
  • If a contract term is ambiguous, courts may allow extrinsic evidence to clarify the intent.

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.

Key Elements Required for a Valid Contract in New Jersey

To be enforceable under New Jersey contract law, a contract must generally include the following essential elements:

  1. Offer – One party must clearly propose terms that the other party can accept.
  2. Acceptance – The offer must be unconditionally accepted by the other party.
  3. Consideration – Each party must exchange something of legal value.
  4. Mutual Assent – Also known as a "meeting of the minds," both parties must understand and agree to the contract's basic terms.
  5. Capacity – Both parties must have the legal ability to enter into the agreement (e.g., of sound mind and legal age).
  6. Legality – The subject matter of the contract must be lawful.

Courts in New Jersey will also assess whether the contract was formed voluntarily, without duress, coercion, or misrepresentation.

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.

Statute of Frauds in New Jersey

While many oral agreements are enforceable, the Statute of Frauds in New Jersey requires certain types of contracts to be in writing, including:

  • Contracts for the sale of real estate
  • Agreements that cannot be performed within one year
  • Promises to pay someone else’s debt (surety agreements)
  • Contracts involving marriage or prenuptial agreements
  • Sales of goods worth $500 or more (under the UCC)

These contracts must be in writing and signed by the party against whom enforcement is sought. Failure to comply may render a contract unenforceable, even if all other contract elements are present.

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.

Distinguishing Express, Implied, and Quasi-Contracts

New Jersey contract law recognizes not only express and implied contracts, but also quasi-contracts, which are not true contracts but legal constructs used to prevent unjust enrichment.

  • Express Contracts: Clearly stated terms, either in writing or spoken.
  • Implied Contracts: Formed by actions or conduct that demonstrate mutual intent.
  • Quasi-Contracts (or contracts implied in law): Arise when one party receives a benefit unfairly, and equity demands compensation, even without a formal agreement.

Courts may impose a quasi-contractual obligation where:

  • One party conferred a benefit on another,
  • The receiving party accepted and retained the benefit, and
  • It would be inequitable for the recipient to retain it without paying for it.

Remedies for Breach of Contract in New Jersey

When a contract is breached in New Jersey, the non-breaching party may pursue several remedies, including:

  1. Compensatory Damages – Intended to place the injured party in the position they would have been in had the contract been performed.
  2. Consequential Damages – Recoverable if the damages were foreseeable at the time the contract was formed.
  3. Specific Performance – A court order requiring the breaching party to fulfill their contractual obligation, typically used when damages are inadequate (e.g., real estate transactions).
  4. Rescission – Cancels the contract and restores both parties to their pre-contract positions.
  5. Restitution – Requires the breaching party to return any benefit they received from the other party.

New Jersey courts focus on actual harm and intent when evaluating these remedies, and they generally do not award punitive damages in contract cases.

Interpreting Contracts Under New Jersey Law

Contract interpretation in New Jersey relies heavily on the plain meaning rule—courts will enforce the ordinary meaning of terms unless the language is ambiguous.

If a contract is ambiguous, courts may consider:

  • The context of the agreement
  • Prior dealings between the parties
  • Industry standards or trade usage
  • Extrinsic evidence (e.g., negotiations, conduct)

Additionally, the parol evidence rule bars parties from presenting outside evidence to alter or contradict a written contract, unless exceptions apply (e.g., fraud or mistake).

Courts also avoid interpreting contracts in ways that produce unreasonable or absurd results, aiming instead to honor the parties’ original intent.

Frequently Asked Questions

1. Do contracts have to be in writing to be valid in New Jersey? No, many contracts can be oral and still enforceable. However, under the Statute of Frauds, certain types of contracts must be in writing.

2. What happens if only one party signs a written contract? If the unsigned party begins performing or accepting performance under the contract, courts may still find the contract enforceable based on conduct.

3. Can a contract be enforced if one party was under 18 years old? Generally, contracts with minors are voidable at the discretion of the minor. Once the minor reaches the age of majority, they may choose to ratify the contract.

4. What is the difference between an implied and a quasi-contract? An implied contract is based on conduct that implies agreement. A quasi-contract is imposed by a court to prevent unjust enrichment, even without any mutual intent.

5. What is considered a material breach in New Jersey? A material breach is one that significantly impairs the contract’s value, allowing the non-breaching party to terminate the agreement and seek damages.

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