Business Law

Published on: June 1, 2018

The Use of Custom and Usage in Interpreting Commercial Contracts Under New Jersey Business Law

Enforceable contracts are the bedrock of a strong economy. If contracts were not enforced, parties could not rely on the other side performing because there would be no remedy if they breached. Therefore, commerce would break down. Enforceable contracts are so important to the economy, in fact, that the freedom to contract is included in both the New Jersey and United States Constitutions. Before a contract can be enforced, however, the parties and the reviewing court must figure out what the contract means. When the terms are clear this normally isn’t a problem. However, when the contract is ambiguous, or even just a part of it is unclear, the question becomes what evidence may be admitted to determine the meaning and intent of the contract.

As I’ve written earlier, New Jersey courts generally adhere to the “parole evidence rule,” which holds that when there is a clear, unambiguous contract, extrinsic, or external, evidence beyond the four walls of the contract is inadmissible to prove what the contract means. However, in New Jersey business law, the exceptions come close to swallowing the rule. Indeed, the New Jersey Supreme Court held as far back as 1953, in the case of Atlantic Northern Airlines v. Schwimmer, that all evidence is relevant if it will assist the trier of fact in determination what the parties to a contract intended and what the contract means – even if that evidence is extrinsic.

The question, then, is what sort of extrinsic evidence is admissible? In the case of commercial contracts, one source of evidence is custom and usage.

Published on: May 16, 2018

Construction Lien Law: Timing is Key

by Robert Chewning, Esq.

McLaughlin & Nardi’s New Jersey construction attorneys represent owners, contr house-construction-3370969__340-300x197 actors and building suppliers in the prosecution and defense of construction lien claims.

As discussed in McLaughlin & Nardi’s overview of construction liens, they can be powerful tools for construction contractors, subcontractors, and suppliers who are experiencing difficulties in getting paid for the work that they have performed.

However, when considering whether to proceed with filing a construction lien for either a commercial or residential project, it is important to know that the contractor (“claimant”) act promptly once it starts to experience payment issues.

Published on: March 16, 2018

The Reach and Limits of the Parole Evidence Rule in New Jersey Contract Law

by Maurice W. McLaughlin

laptop-3175111__340-300x200 New Jersey Courts have followed the Parole Evidence Rule since at least 1882. The Parole Evidence Rule holds that outside (or “extrinsic”) evidence is not allowed to alter the terms of a contract – in other words, the Parole Evidence holds that, the meaning of a contract is contained within its own four walls. Unlike most rules with the word “evidence” in it, the Parole Evidence Rule is not actually part of the Rules of Evidence. In fact, it is not really an evidence rule at all. Rather, it is a substantive rule of law which holds that once the parties sign a contract, their prior negotiations are irrelevant because they have selected the terms of their agreement.

The first requirement for the Parole Evidence Rule to be invoked is that there must be a written contract – the Parole Evidence Rule only applies to agreements which have placed into a written contact. Second, the written contract must be intended as the parties’ final agreement. While this may seem self-evident, in the early stages of commercial transactions parties often use “letters of intent” which are not intended as the final agreement, but only as the broad outlines of how the parties foresee their eventual agreements turning out. Finally, the contract must be a “fully integrated” agreement. This means that the contract must cover all parts of the transactions, not just some elements; the Parole Evidence Rule does not bar extrinsic evidence in the interpretation of “partially integrated” contracts.

Limitations on Application of the Parole Evidence Rule

Published on: March 6, 2018

New Jersey Contract Law Issues: The Economic Loss Doctrine, Fraud in the Breach Versus Fraud in the Inducement, and the Duty of Good Faith and Fair Dealing

by Maurice W. McLaughlin

block-chain-2853046__340-300x134 Our attorneys represent people and businesses in all aspects of contract law, including contract negotiations, drafting, review and contract litigation. One of the more complex areas of contract law if the interplay of contract and tort law when fraud and contracts intersect. While this issue is complex, there are several basic rules and principles.

The Economic Loss Doctrine – Fraud in the Performance of a Contract

New Jersey contract law adheres, if somewhat loosely, to the “economic loss doctrine.” What this rule says is that after two parties enter into a contract governing their relationship, their remedies for economic loss are limited to breach of contract. They cannot sue for torts (civil wrongs) such as fraud. Thus, as a hypothetical example, after a contract is signed for ABC Company to pay XYZ, LLC $10,000 for the manufacture and delivery of ten motors, if XYZ takes the money and then keeps telling ABC that the motors are coming “soon” knowing full well it is never going to deliver, ABC is limited to suing XYZ for breach of contract when the motors aren’t delivered. ABC cannot sue for fraud in the performance of the contract. This is the heart of the economic loss doctrine. The practical difference is that punitive damages are available if a party is found guilty of fraud, but punitive damages are not available for breach of contract.

Published on: February 13, 2018

Restrictive Covenants in Employment Agreements and Business Law

by Maurice W. McLaughlin

What is a Restrictive Covenant?

A restrictive covenant is a contractual agreement in which one party receives something of value in exchange for a promise not to engage in a particular type of behavior. Restrictive covenants can bind people or businesses.

What Types of Restrictive Covenants Are There?

Published on: January 31, 2018

New Jersey Liquor License Transfer Applications

by Jennifer C. Meusel

bar-2832543__340-259x300 When you purchase a liquor license in New Jersey, as a Buyer you must be approved by the State of New Jersey Alcoholic Beverage Commission and the Municipality where the business operates. This process is detailed and time consuming. it must be started as soon as possible by the Buyer. You will need to obtain a Person to Person Transfer of the liquor license. Unless and until the municipality issues a resolution approving of the transfer of the liquor license, the current license holder must operate the business.

In order to be approved, the applicant must meet the following requirements:

a) 18 years of age or older;

Published on: November 21, 2017

New Jersey Supreme Court Issues Landmark Decision on Statute of Limitation in Construction Defect Cases

by Maurice W. McLaughlin

building-2603161__340-300x200 The New Jersey Supreme Court recently issued an important decision in the case of Palisades At Fort Lee Condominium Association, Inc. v. 100 Old Palisade, LLC, defining when the statute of limitation will begin to run in construction defect litigation. This decision is now the defining law on the timeliness of construction lawsuits.

Background

The devil is in the details, especially in construction law. These are the facts in this one.

Published on: November 17, 2017

Third Circuit Issues Important Wage & Hour Decision

by Maurice W. McLaughlin

Wage and Hour Laws Governing New Jersey Workplaces

The Fair Labor Standards Act is the federal law which, along with the Wage and Hour Division of the United States Department of Labor’s regulations found in the Code of Federal Regulations, governs overtime and minimum wage requirements. The Fair Labor Standards Act (known as the “FLSA”) requires that most employees (known as “non-exempt” employees, or those who are not exempt from overtime requirements) be paid “time and a half” for all hours they work over forty in any particular week.

In an action for violating the F

Published on: November 3, 2017

Solid Waste Transportation: Violations of NJDEP Regulations and Laws

by Maurice W. McLaughlin

toy-2883494__340-300x200 There is a large and complex body of laws which restrict and regulate the of waste transportation businesses in New Jersey. Indeed, New Jersey has arguably the most stringent requirements and restrictions on the solid waste industry in the country.

The New Jersey Department of Environmental Protection (“NJDEP”) has broad authority and power to control and supervise waste transportation and disposal through multiple statutes. Indeed, the NJDEP has authority under New Jersey’s Solid Waste Management Act as well as the Solid Waste Utility Control Act (“SWUCA”). The SWUCA took effect in 1970 as a result of a 1969 report published by the New Jersey Commission of Investigation which found that the solid waste business was heavily influenced and effected by organized crime. As a result, initially the Board of Public Utilities, and later the NJDEP, was empowered to monitor rates being charged and services being provided by waste transportation companies.

There are also a number of regulations which have been created to effectuate the intent and goals of the Acts. As a result, New Jersey solid waste collectors and haulers are subject to close regulation. However, this regulation has actually lessened somewhat over time. Indeed, while initially the Board of Public Utilities was actually permitted to set rates for waste transporters to charge, whereas, currently, now they only evaluate and monitor the rates being charged to ensure effective competition in the marketplace.

Published on: October 31, 2017

Fiduciary Duties Owed by Owners of Limited Liability Companies Under New Jersey Business Law

by Maurice W. McLaughlin

business-meeting-and-teamwork-large-team-at-the-table-300x160 New Jersey has followed the national trend in creating the “limited liability company,” (known as “LLC”), as an allowable form of business entity under New Jersey business law. The LLC combines the best elements of both a corporation and a partnership.

The Limited Liability Company

A (Limited liability company combines the best qualities of both corporations and partnerships (or sole proprietorships). Like corporations, but unlike partnerships and sole proprietorships, owners (known as “members” in an LLC) are shielded from personal liability for most corporate debts. However, like partnerships and sole proprietorships (but unlike many corporations, especially larger corporations), LLCs are “flow through” entities. This means that the business itself pays no income taxes. The profits “flow through” to the owners, who are then taxed on the profits as their income. This avoids the “double taxation” of corporations, where the company pays taxes on the profits before they are distributed to the owners, and then the owners pay income tax on the remaining after tax profits when they receive them. So essentially members in an LLC only pay tax once, while shareholders in a corporation pay tax twice, which can result in significantly higher after tax earnings for the owners on the same business revenue.