News & Noteworthy

Authored - NJ Contract Law Update - Formalities Count When Transferring Stock as Part of a Contract
DECEMBER 11, 2012 | Windels Marx - Commercial Litigation

In Acquaviva v. DiMisa, ___ N.J.Super. ___, 2012 WL 4935276 (N.J.App.Div. Sept. 25, 2012), the Court emphasized some of the formalities necessary to effectuate the transfer of an interest in securities. That case arose in a collection context, with a contract/transaction background.

Although a number of issues in the case are of interest, one item of note for the contract practitioner is this: when dealing with an agreement involving a meaningful transaction, such as the transfer of a business interest, keep in mind that every such transaction involves a series of sui generis contract issues1. For example, the transfer shares of shares in a company may be subject to challenge if the formalities are not met. See N.J.S.A. 12A:8-304(c), discussed in Acquaviva; involving (1) possession of the share certificate, and (2) "indorsement" thereof.

As noted, Acquaviva arose in a collection setting, and the Court 'stood' on the statutory formalities. That Court's inclinations may have been colored somewhat by that context--as opposed to whether the Court might have been more creative (using concepts such as "equity deems done that which ought to have been done", had such concepts been raised by the parties) in a more traditional setting involving the direct parties to the transfer. But the moral of the story is to be careful to "cross your t's and dot your i's" in this area. And once again2, when dealing with sui generis contract issues (such as those involving stock transactions), consult experienced counsel.

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 Please see my prior Article, "Some Types of Contracts are Sui Generis", Sept. 24, 2012.
2 See prior footnote.

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