News & Noteworthy

Authored - NJ Contract Law Update - Another Risk of Enforcing a Governmental Contract: Potentially Violating the Bidding Statutes
MARCH 06, 2013 | Windels Marx - Commercial Litigation

Coactiv Capital Partners v. Englewood Housing Authority ("EHA"), 2013 WL 512348 (N.J.App.Div. February 13, 2013), reflects the a fortiori risks of dealing with governmental contracts when there is also a public bidding framework underlying the contract. Moreover, Coactiv entails the very example set forth in an earlier Article in this series: namely, the public entity 'proper' has not officially approved the contract, but the Executive Director of the agency has.

More specifically, EHA's Executive Director had signed a replacement copier-lease--only to have EHA's accountant advise that the lease violated public contracts laws involving bidding and the like. EHA-authorized payments were thereafter made by EHA under the Lease, apparently to facilitate settlement discussions that did not come to fruition. The lessor in Coactiv then sued for the balance of the lease. EHA obtained summary judgment on the basis that the Executive Director of the Agency could not supersede the public contracts and public bidding laws, even if there were subsequent payments.

The Court noted exceptions, in other kinds of cases, where there has been "an innocent party who fell victim to the fraud of a third party". The Court felt that such principle, if applicable to this area, was not applicable in this case. The Court also felt that the partial payment did not supersede the statutory proscriptions; citing case law involving even broader payment history.

The moral of the story is that when dealing with governmental contracts, not only should one be wary enough to get official written approval from the agency as a whole--i.e., an official Resolution of the agency as an entity, rather than an agreement from its Executive Director, for example; but in addition if the contract involves a public-bidding category or analogous prohibition--e.g., "pay to play"--then even a Resolution of the agency 'proper' may not supersede the law or validate an invalid contract.

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.

Windels Marx helps you harness opportunity and mitigate risk with a team that provides your business with the service, quality and value essential to a trusted relationship.