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Somang Corp. v. H & EK, Inc.

A-2523-02T1 (N.J. Super. App. Div. 2004) (Unpublished)

CONTRACTS; SETTLEMENTS—Where it seems that a party’s underlying assertion is that it failed to realize the benefits of a contract, a court will not overturn a subsequently reach settlement agreement based on the party’s allegation that it did not understand the settlement when reached.

In the sale of a business, a seller took back a note and security interest. The buyers were to make sixty monthly payments to the seller, but defaulted after only eight. Although the case went to arbitration, the sides reached a settlement before the arbitrator decided. The settlement required the buyers to make “diligent effort” to resell the business and to share the net proceeds, 55 percent to the seller and 45 percent to the buyer. The buyers did not follow through on the required effort to sell the business, so the seller filed a motion to enforce the settlement. An order of enforcement was issued.

The buyers contended that they spoke little English, and on the date of the arbitration their attorney did not have authority to enter into the terms of the settlement agreement. The buyers also contended that their counsel did not properly explain to them their options. When the settlement was reached, though, there was an interpreter available to them at the scheduled arbitration. Regardless, the buyers did not challenge the settlement on those grounds in response to the seller’s enforcement motion. The Court held against the buyers, telling them that such a claim needed to be made against their former attorney, not the seller.

To the Court, it was simple. The seller had not been paid in accordance with the original agreement, and the buyers had been operating their business for over eight years. The only explanation provided by the buyers was “they did not make as much money as the seller led them to expect from the business,” and “they had a lot of debt.” This was not enough to induce the Court to intervene, so the settlement agreement was to be enforced.

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