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North Jersey Development Group v. Schott Flex Park Partnership

C-261-96 (N.J. Super. Ch. Div. Morris Cty. 1998) (Unpublished)

STATUTE OF FRAUDS—The essence of the exception to the real property statute of frauds that allows an oral agreement to be enforced if its essential terms can be proven by clear and convincing evidence is whether there was a meeting of the minds.

The legislature, by adoption of Section (b) of N.J.S. 25:1-13, changed the long standing signed writing requirement of the Statute of Frauds as applied to real property transactions. That subsection now provides that an agreement to transfer or hold an interest in real estate for the benefit of another shall not be enforceable unless: “b. a description of the real estate sufficient to identify it, the nature of the interest to be transferred, the existence of the agreement and the identity of the transferor and the transferee are proved by clear and convincing evidence.” In this case, although a number of documents passed back and forth between the parties, it was clear that no signed document existed. Therefore, the purported buyer’s request for specific performance by its purported seller rested on the applicability of subsection (b) quoted above. In proposing the legislative change, the legislative history indicated: “...strict application of the [old] Statute sometimes resulted in the unjust repudiation of contracts that actually were made… It is the Commission’s view that a preclusive writing requirement is neither necessary nor desirable. ... The Commission believes that the focus of inquiry in a situation involving an agreement for the sale of an interest in real estate ... should be whether an agreement has been made between the parties by which they intend to bound.” With that as background, the Court found that subsection (b) is consistent with the common law principle that both mutual assent and agreement on the essential terms are pre-requisite to a contract’s enforceability. Mutual assent is defined as a “meeting of the minds” or an intent to be bound by the agreement. Here, the history of negotiations left no doubt as to the description of the property in question and left no doubt as to the identities of the buyer and the seller. This left a disputed issue as to whether the parties intended to be bound by the purchase offer made by the buyer. The lower court heard a great deal of testimony respecting the intent of the parties. Based on considerations of credibility and the lack of a finite document, the lower court found that the putative buyer had not proven to a clear and convincing decree that the parties intended to be bound by its offer. Consequently, its claim that a contract existed (for which it sought the relief of specific performance) was denied.

While the putative buyer and seller were negotiating for the sale of the land in question, the putative buyer entered into an agreement with a supermarket for the sale of part of the land that was under negotiation. A Letter of Intent was executed between the putative buyer and the supermarket that precluded the parties from negotiating with others. Furthermore, the parties had agreed on a purchase price. Because of the advanced stages of the negotiations between the putative buyer and the supermarket, the Court concluded that the putative buyer had a reasonable expectation of economic advantage in both of its potential contracts. To prove its claim that the supermarket interfered with its prospective contractual relations, the putative buyer was required to show that the supermarket acted intentionally and with malice. Without doubt all parties acted with knowledge that the other parties were engaged in negotiations. Consequently, when the supermarket went directly to the landowner, its actions and that of the landowner were clearly intentional. This left the remaining issue as to whether the putative buyer could prove that either the landowner or the supermarket acted maliciously when the landowner subsequently sold its property to the supermarket. A showing of “malice” requires proof that the perpetrator’s conduct was not “right” and would not be sanctioned by the “rules of the game.” In this context, malice means “sharp dealing.” Here, however, the Court found that the landowner did not intend to be bound by its preliminary agreement with the putative buyer and that this permitted the landowner to accept a better offer. Accordingly, the Court did not believe that “sharp dealing” was involved on the part of the landowner when the landowner accepted the supermarket’s offer. However, the context of the negotiations between the putative buyer and the supermarket was found to be a closer question of tortious interference. Clearly, the exact language of the Letter of Intent precluded the supermarket from negotiating with “another” property within ninety days. Here, the supermarket was found not to have violated the Letter of Intent because the landowner’s property was the very same property in question, and not “another” property. Therefore, the Court found that the supermarket did not operate outside the “rules of the game” when it negotiated directly with the landowner.

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