Contract v. Quasi Contract

Our business litigators represent parties whose relationship is formed under both contract and “quasi-contracts.”  New Jersey business law provides that while the parties can voluntarily create their own obligations under an express contract which they have jointly agreed to, they may also create obligations to each other under what is known as quasi-contracts.

Contracts and Contractual Remedies

A contract is defined by New Jersey law an agreement which is voluntarily entered into, and which creates voluntary, mutual and binding obligations arising from a common understanding as expressed in “offer and acceptance.”  Being a legal definition, there is of course a test for what constitutes a binding contract, and this is set out in the Model Civil Jury Charges used by New Jersey’s Superior Court.  To be a binding contract, an agreement must have the following: (1) offer and acceptance, (2) the parties must have a “meeting of the minds” about the agreement’s essential terms, (3) there must be valid consideration – in other words, there must be mutual obligations from each party to the other, (4) finally, there must be certainty – the agreement must have clear and definite terms.  Both written and oral contracts are enforceable.  With oral contracts, of course, the difficulty is often getting evidence to prove it existed at all.

If the parties violate the terms of their contract, that is if they breach the contract, a court will enforce the contract and certain remedies are available.  In general, the remedy for breach of contract is compensatory damages – ie., to make the innocent party whole.  In business situations this often means lost profits, or the revenue the innocent party would have received minus the cost it avoided.  Generally, however, an award of attorneys fees is not available unless the parties expressly agree to it in their contract.

Another avenue for relief which a contract provides is the “covenant of good faith and fair dealing.”  New Jersey business law implies to every contract the agreement by the parties to act fairly and in good faith with the other parties so that they may get the benefit they bargained for, regardless of whether or not that was written into the contract.  Breach of the covenant of good faith and fair dealing provides the same remedies as a breach of the contract itself.

Quasi-Contractual Remedies

Even if an agreement which meets the requirements of a contract is missing, obligations can be implied by New Jersey contract law which will give the “innocent” party remedies similar to a contract.  Unlike contracts, however, quasi-contract relief is an equitable remedy, not a legal one.

·         Promissory Estoppel.  Promissory estoppel is like a contract, in that it requires a promise, but it may be found even without the formalities of a contract.  Promissory estoppel requires the person trying to enforce the promise proves these elements.  (1) the other party made a promise which was definite and clear; (2) the party made the promise expecting that the other party benefit would rely on it; (3) the “innocent” party actually relied on it; and (4) that justifiable reliance on the promise caused identifiable loss.  Unlike in fraud, there is no requirement that the promising party intended to deceive the other.

·         Quantum Meruit.  Quantum meruit involves a situation where the relationship between the parties is close enough to a contractual relationship that a court will imply an enforceable agreement between them.  Under New Jersey business law, a party seeking to recover under a claim of quantum meruit has the burden of proving:  (1) One of the parties must have preformed services for the other in good faith; (2) the other party voluntarily accepted the services; (3) the first party reasonably expected payment for the services; and  (4) the charges were reasonable.

·         Unjust Enrichment.  Unjust enrichment is similar than quantum meruit but based on a different premise – society has an interest in preventing a party from wrongfully retaining a benefit when it doesn’t compensate the party which gave it the benefit.  A party seeking relief under unjust enrichment has the burden of proving: (1) That the other party received a benefit from it; (2) it would be unjust to allow that party to receive the benefit without compensating the first party for it; (3) it expected to be compensated for conferring the benefit; and (4) the party which received the benefit would be unjustly enriched beyond whatever contractual rights it had.

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Our New Jersey contract attorneys represent people and businesses draft and negotiate contracts which protect their rights.  Our litigators will fight for our clients in contract and quasi-contract disputes when their rights have been violated.  Call us at (973) 890-0004 or email us to schedule a consultation.  We can help.

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