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National Fence Systems, Inc. v. National Metal Industries, Inc.

A-2698-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

STATUTE OF FRAUDS; GUARANTEES—Absent a written agreement that one company would pay the debts of a related company, the statute of frauds bars the admissibility of any alleged oral promise.

A distributor sued a supplier who was also a customer. It alleged many instances where it had made duplicate payments to the supplier for the same invoices, as well as other times when its payments were not credited at all. The distributor also produced cancelled checks, matching invoices, and credit memos, all detailing the double payments and non-credited payments.

The supplier presented no evidence disputing that the claimed funds were owed to the distributor. It claimed, however, that its distributor’s payments were applied to the outstanding debts of two defunct corporations, related to the distributor, in accordance with an unwritten agreement or “handshake” between the supplier and the owner of those companies, who was the father of the principal of the distributor. The supplier admitted that it had no agreement with its distributor to apply payments to those companies’ obligations, and provided no evidence of any affiliation between the distributor and those companies. Therefore, because there was no written agreement between the distributor and the supplier that the distributor was to assume responsibility for those debts, the lower court held that the Statute of Frauds barred the admissibility of any alleged oral promise. The Appellate Division agreed.

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