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Authored - NJ Contract Law Update - The Written Contract Is As Clear As Day--And It Was Reaffirmed In Writing--But It Can't Be Enforced
AUGUST 23, 2012 | Windels Marx - Commercial Litigation

There are a number of recent cases refusing to enforce clear, signed written agreements. That trend should put all practioners on high alert in terms of whether they can believe what they see, at any stage--(1) negotiation/execution; (2) reliance/performance; (3) closing; (4) post-performance documentation; or (5) litigation.

Pinecrest Village, Inc. v. SP 72, LLC

As a follow-up on my August 8, 2012 Article, "When is a Signed, Written Contract Not a Contract at All?", this article focuses on Pinecrest Village, Inc. v. SP 72, LLC, 2012 WL 3047045 (N.J.App.Div. July 27, 2012); which enforced an alleged oral agreement (OA) at odds with two formal written agreements, one before the OA and one after. Pinecrest held that the clear written agreement (WA) between two sophisticated parties--followed by a written "survival agreement" (SA) that came after, but did not mention, the supposedly fully-performed OA--was nonetheless unenforceable in relevant part.

The SA had stated that each party's respective obligations under the original agreement survived the closing. (A written amendment that extended "the time for Pinecrest to complete its obligations" was also listed as surviving.) The SA thus ostensibly reaffirmed all of the obligations in the original contract after performance of the alleged OA had occurred, allegedly shifting those responsibilities.

The Court nonetheless permitted plaintiff to establish rights under the OA. The Court indicated it was doing so because the defendant had "voluntarily assumed [and had actually performed] [certain...] responsibilities, even though, under the written terms of the agreement, they had been assigned to [plaintiff]." To the Court, the key fact was that the defendant (1) had actually performed the activities in question, which under the SA were instead to be performed by the plaintiff--because (the Court found) (2) the defendant felt a need to accelerate completion of those activities. The WA was thus deemed superseded on all relevant points, even though it was subsequently reaffirmed in the SA.

The Court does not appear to have considered, nor do the parties appear to have briefed, the question of whether the contract was in effect being reformed by the Court's ruling. In that event, the question of revising the amount of consideration, in light of the fact that the defendant had relieved plaintiff of some of the bargained-for cost of performance, could have been considered.

The Court also focused on another issue that should be of great concern to practitioners: Even with a clause clearly indicating that oral or informal amendments are impermissible, a court can find (if it is "clear") that a subsequent oral agreement was made and/or performed, thus waiving even the non-waiver language. That point should be of great concern, certainly in every commercial context1.

Pinecrest exemplifies the fact that sometimes even the most bedrock legal principles may offer no solace to the practitioner.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 Note that there may be protective language, beyond the normal boilerplate, that might help prevent this result. See Alpert, Guide to New Jersey Contract Law (NJICLE 2d ed. 2011) (Forms CD-ROM).

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