News & Noteworthy

Authored - NJ Contract Law Update - Even An Uncounseled Release May Be Enforceable
JANUARY 31, 2013 | Windels Marx - Commercial Litigation

In Beneventine v. Siemens Hearing Instruments, Inc., 2012 WL 6554264 (N.J.App.Div. Dec. 17, 2012), the Court enforced an uncounseled release for a relatively limited amount--even though by signing the release, the releasor/former employee may have inadvertently waived much more than the amount paid in overdue salary.

Specifically, for a net check of $1,500, plus (in effect) forgiveness of another $8,500, plaintiff ex-employee had released defendant (his former employer) following several years of employment (which itself followed several years of consulting contracts). The reason for the termination was not challenged by plaintiff (e.g., no claim of discrimination). Rather, upon employee's request for severance pay, $8,500 owed by plaintiff to defendant for product (pursuant to arrangements in effect between the parties) was forgiven; and an additional $1,500 was paid by the employer to the employee.

"Sometime later an accountant reviewed the 1099 forms and advised that $22,664.71 remained unpaid over a period of years of employment." Without discussing (1) the wage-and-hour law or the statute of limitations as it might have applied to same, or (2) issues of unconscionability or the like (if the Opinion is a guide, none of these issues seems to have been raised), the Court enforced the release as against a claim of mutual mistake. The Court found (in effect) that the doctrine of mutual mistake applies to something 'structural', such as (in the precedent cited by the Court) a counterfeit coin sold as though it were real; and not to the issue of 'greater amounts supposedly being owed than were paid'.

The Court also found that equitable estoppel did not apply, because the severance pay was voluntary on the employer's part; and that it made no difference whether money was paid as severance pay rather than a "settlement payment"

The moral of the story is that one must assume that a release containing sufficiently broad language may be enforceable, even if signed by an uncounseled party under arguably inequitable circumstances, at least in retrospect. A subordinate point is that tying the defense of the release back into a 'public policy' argument--such as a wage and hour deficiency (an issue that does not appear in the Opinion, so it is difficult to know whether it was argued)--may enhance an ostensibly 'vanilla' contract argument against a release. Moreover, further emphasis on the lack of legal representation (unless the issue was raised, again outside the Opinion) may have helped the defense.

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.

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