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EQ Acquisitions 2003, Inc. v. Core Digital Acquisitions, Inc.

BER-L-14370-04 (N.J. Super. Law Div. 2005) (Unpublished)

STATUTE OF FRAUD—Where a loan is subject to the statute of frauds, so are related modifications and forbearance agreements.

A production company borrowed money to buy two television production trailers and related equipment. The production company then filed for bankruptcy protection. At the time of the filing, it owed its lender more than five million dollars. The lender and production company entered into a stipulation that included a payment plan and provided for a different production company to take over the payment obligations. The lender subsequently assigned its rights to a successor lender. When the second production company failed to meet its payment obligations, the new lender accelerated the debt and sued. The lender moved for summary judgment based on the second production company’s failure to abide by the settlement terms. The second production company claimed that it had reached an oral agreement with the prior lender, whereby payment obligations would be deferred while the production trailers were repaired. The prior lender denied such an agreement existed. The current lender claimed that even if there was an oral modification to the written settlement agreement, it was void because it would be barred by New Jersey’s Statute of Frauds. The Court agreed and granted summary judgment in the lender’s favor. The New Jersey Statute of Frauds provides that a contract to lend money in an amount greater than $100,000, not primarily for personal, family or household purposes, and made by a person in the business of lending, must be in writing. In addition, it provides that any agreement by a creditor to forebear from exercising its remedies must also be in writing. Since the loan was subject to New Jersey’s Statute of Frauds, the modification and agreement to forebear also had to be in writing and they weren’t.


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