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Softpro iTechnology Partners, LLC v. Scosys, Inc.

A-0418-04T3 (N.J. Super. App. Div. 2006) (Unpublished)

CONTRACTS; STATUTE OF FRAUDS—Where there is no formal agreement and where parties state that they do not intend to be bound except upon signing an agreement in writing, no contract comes into existence.

A prospective buyer of a company delivered $50,000 to its target. The prospective buyer and the target company executed an “‘Initial Due Diligence Agreement’ which, among other things, provided that ‘If the parties decide to proceed, a formal Sale/Purchase Agreement shall be drafted by the parties’ attorney.’” No formal agreement was ever reached. When another buyer acquired the target company, the initial prospective buyer claimed that the $50,000 payment was a down-payment. The target company disputed that claim and pointed out that it had executed a promissory note and a mortgage to secure that amount. Both the lower court and the Appellate Division agreed that no contract of sale ever came into being. According to the Court, “[t]he parties obviously contemplated and intended that the purchase/sale of the business would take place and be evidenced by a formal written agreement as evidenced by the ‘Initial Due Diligence Agreement.’” Because there was no formal agreement and because the parties had stated that they “did not intend to be bound except upon signing an agreement in writing,” the Court was satisfied that “no rational fact finder could resolve the alleged dispute in favor” of the original prospective buyer.

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