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Centralpack Service Corp. v. N.B. Rex Transport

A-3432-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

GUARANTEES; STATUTE OF FRAUDS—The statute of frauds generally bars oral promises to pay the debt of another and principles of estoppel should not be used to swallow that rule, but where an oral promise is intended to, and does, induce a supplier to grant credit to a customer that would not otherwise enjoy such credit, the promissor is estopped from denying the guaranty.

A company performed repair services for a customer that it feared was insolvent. Consequently, before performing the services, it obtained, from the insolvent company’s owner, “‘an assurance’ of personal responsibility for payment of the work.” Based upon that promise, the lower court found the insolvent company’s owner personally liable for the services. The owner appealed, arguing that the claim against him was barred by the Statute of Frauds which requires that “[a] promise to be liable for the obligation of another person, in order to be enforceable, shall be in writing, signed by the person assuming the liability… .” The guarantor pointed to a 1957 Chancery Division opinion enjoining “courts not apply principles of estoppel with undue liberality in Statutes of Frauds situations lest the exceptions swallow the rule and nullify the Statute of Frauds.” Here, the Court believed that the facts removed this particular case “from the realm of the ordinary.” It found that the individual owner’s “promise and inducement were given specifically in response to the concerns expressed by [the repair company’s owner] that [the insolvent company’s insolvency] would result in non-payment of the obligation.” It was the insolvent company’s owner’s specific guarantee that overcame the reservation expressed by the repair company. Consequently, the Appellate Division found the lower court’s “application of estoppel principles to be essentially correct” and affirmed the judgment against the individual owner personally.

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