Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Are Letter Agreements Binding Contracts or Not?

Author: Scarinci Hollenbeck, LLC

Date: November 25, 2013

Key Contacts

Back

New Jersey business partners often execute letter agreements, which outline the fundamental terms of the business transaction prior to consummating the final contract.

However, when deals go south, poorly drafted letters of intent can lead to messy breach of contract lawsuits.

In a recent breach of contract case, a New Jersey judge refused to compel the consummation of a business deal based on a letter of intent between the parties. AECOM Capital Management v. Hartz Mountain Industries Inc. involved the purchase and sale of a Jersey City parking lot, which was slated for residential development.

During their negotiations, Hartz Mountain and AECOM entered into a letter agreement, which established a $50 million purchase price, allowed AECOM to conduct due diligence, and prohibited Hartz Mountain from negotiating with other buyers for 60 days. The final deal was contingent upon execution of a purchase agreement. Hartz Mountain did entertain other offers during the exclusivity period and ultimately decided to sell to another buyer. AECOM filed suit, seeking specific performance.

The court ultimately concluded that a letter of intent did not create an enforceable interest in the property, despite the fact that AECOM had accumulated sizable due diligence fees. Thus, Hudson County Superior Court Judge Hector R. Velazquez ruled that specific performance was not an appropriate remedy.

“There were a number of important issues yet to be resolved…and the final contract was certainly not ready to be executed by any of the parties,” the Court stated. Judge Velazquez further noted that the evidence indicated that the parties, both of whom were represented by highly experienced lawyers, intended to be bound only by a final and fully executed purchase agreement.

“It certainly…would not be equitable to enforce an unsigned agreement that was still being negotiated simply because the Plaintiff engaged in the due diligence and chose to commence its construction and development process,” Judge Velazquez added.

To avoid a similar fate, businesses are advised to seek the assistance of an experienced New Jersey business attorney, to make it more clear that there are portions of the letter of intent that are enforceable agreements in and of themselves, even if a final transaction remains to be negotiated.  It is key that that the wording of the letter of intent should be drafted to reflect the true intent of the parties.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Victor Kinon, or the Scarinci Hollenbeck attorney with whom you work.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Dissolving Your Business: Essential Legal Steps to Protect Your Interests post image

Dissolving Your Business: Essential Legal Steps to Protect Your Interests

If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]

Author: Christopher D. Warren

Link to post with title - "Dissolving Your Business: Essential Legal Steps to Protect Your Interests"
The Role of Corporate Restructuring in Mergers & Acquisitions post image

The Role of Corporate Restructuring in Mergers & Acquisitions

Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]

Author: Dan Brecher

Link to post with title - "The Role of Corporate Restructuring in Mergers & Acquisitions"
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public post image

Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public

Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]

Author: Bryce S. Robins

Link to post with title - "Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public"
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!