Is a Verbal Agreement Binding in New Jersey?

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Generally, oral contracts are binding under New Jersey contract law, but there must be a written contract to enforce certain types of agreements. New Jersey’s statute of frauds provides that certain types of agreements must be in writing:

  • Promise by a person or entity to be responsible for the debts or obligations of another party.
  • Lease for real property that exceeds three years.
  • Agreement where a creditor says they will not exercise rights or remedies in a contract, and the amount in question is over $100,000.
  • Loan, grant or grant of credit for over $100,000, made by a person or financial institution that lends money.
  • Contract for the sale of land or real property, including mortgages and easements.
  • Contract for a real estate broker’s commission for sales and leases, with a few exceptions.
  • Prenuptial agreements made after February 19, 2007, that outline how property will be divided if the parties divorce.
  • Contracts for the sale of goods governed by the New Jersey Uniform Commercial Code.
  • Contracts for the sale of securities like stocks or bonds.
  • Contracts for health clubs, home improvement contractors, motor vehicles sales and employment agencies.

Suits for Breach of Contract

A valid verbal agreement will stand up in court if it has all the necessary elements of a valid contract. These include:

  • Valid offer and acceptance of the terms of the agreement.
  • Meeting of the minds, showing that parties to the contract are in agreement about essential terms like the amount of the offer.
  • Consideration, or compensation, by one party to another for performance of the contract.
  • Capacity of the parties entering into the contract to understand what they are doing and are capable of fulfilling those obligations.
  • Legality, that the subject matter of the contract is allowed by law.

If time is of the essence, the timing of certain events should be stated in the contract.

Failure to Adhere to a Contract

If a party does not meet their obligations as outlined in an oral agreement, the other party can sue for breach of contract. Failure to adhere to a contract includes:

  • Failing to do everything required under the terms of the contract.
  • Spending substantially more money on the goods or services specified in the contract than the contract required.
  • Not completing work in a timely manner, if time was of the essence.

A person with questions about contractual obligations can seek legal advice from a contract attorney. If the entity with questions is a corporation, limited liability company (LLC) or limited partnership, the company should talk to a corporate attorney.

Filing a Contract Dispute in Small Claims Court

A person in New Jersey can file a lawsuit for breach of contract in:

  • Small claims court if the amount is under $3,000.
  • Special Civil Court if the amount is over $3,000, but less than $15,000.
  • Law Division of the Superior Court if over $15,000.

Generally, a party to the suit can present their case in court without an attorney. A corporation is required to be represented by counsel or its case will be dismissed.

Evidence to Bring to Court

Parties to the suit should gather evidence that shows that a contract existed and how the parties behaved, including:

  • Copy of the contract, if written.
  • Communications leading up to the contract, such as letters, emails and texts.
  • Communications, photos or other documents that show how one or more parties breached the contract.
  • Documents that show how entities or conditions that did not sign the contract affected the contract. For example, if a certain type of equipment necessary to complete the contract could not be acquired, the defendant might want to show proof that they were unable to secure this equipment.

Filing a Police Report

Generally, a party to a contract should not file a police report regarding the breach of a contract, but they may consider filing a police report if they paid the other party, and the other party failed to provide them with the goods or services contracted for. The incident could be considered theft.

The party’s home insurance company or business insurance company may request a police report if the contract concerned the home or business.

There are limits to police reports that a party can make online. A person with a concern should read the rules for their local police department or sheriff’s office. For example, they may have to go in person to make a report if the matter concerns theft of property over $200.

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