NJ Supreme Court Narrowly Defines “Aggrieved Consumer.” End Of The Road For One Type Of “No Injury” Class Action?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Contract(pd)
I have written a number of times about New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). (Here, here, and here for example.) This statute, which was largely ignored after it was enacted in 1981, became increasingly popular in recent years as part of so-called no injury class actions. (So-called mostly by defense counsel, not plaintiff's counsel.) Its popularity may now have come to an end, however, because the New Jersey Supreme Court recently issued its opinion in the highly-anticipated case, Spade v. Select Comfort Corp., which answered two questions certified to it by the U.S. Circuit Court of Appeals for the Third Circuit, one of which appears to hamper, at the very least, the ability of plaintiffs to sue for alleged violations of the act.

By way of brief background, the TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. It provides:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract containing a provision that violated a legal right of the consumer or a responsibility of the seller; and (4) that it was an "aggrieved consumer." Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, and reasonable attorneys' fees and court costs.

The questions certified to the Supreme Court in Spade arose out of two cases that had been consolidated by the district court. Each involved plaintiffs who ordered furniture pursuant to contracts that violated certain regulations promulgated by New Jersey's Division of Consumer Affairs. The regulations require, among other things, that furniture sellers deliver furniture to customers by or before the promised delivery date or provide written notice that they will not be able to do so. Sellers must also provide notice to the purchaser that if the delivery is late, the consumer has the option of canceling the order and receiving a full refund, or agreeing to accept delivery at a specified later date. The regulations also prohibit sellers from including certain language in their contracts, such as "all sales final," "no cancellations," and "no refunds." In Spade, plaintiffs alleged that the contracts they entered into with defendants did not contain language required by these regulations, contained language prohibited by these regulations, or both. Notably, however, plaintiffs received their furniture deliveries on time.  

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In New Jersey, You Can Now Disapprove A Real Estate Contract By Email Or Fax (But Not Telegram)

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Telepgraph (pd)Anyone who has bought or sold real estate in New Jersey is familiar with "attorney review." When you buy or sell a house, you sign a contract that is almost always prepared by a broker. The contract must contain a standard provision stating that the buyer and seller have the right to have an attorney review the contract. This "attorney review" period lasts three days. The contract becomes legally binding if, at the end of that three-day period, neither the buyer's nor the seller's attorney disapproves of the contract. If either side disapproves, their attorney must notify the other side's broker by certified mail, telegram, or personal service. In Conley v. Guerrero, a case that seems to be a case study in the concept of raising form over substance, the New Jersey Supreme Court updated this requirement to allow the notice of disapproval to also be sent by fax or email. (Those of you still using telegrams may be out of luck, however, because this no longer appears to be an appropriate method of service for the notice of disapproval.) 

In Conley, plaintiffs signed a form contract to purchase a condominium unit from sellers. It contained the standard "attorney review" provision. After signing the contract, but during the attorney review period, sellers received competing offers to purchase the property and eventually entered into a new contract to sell it to a new buyer for a higher price. Sellers' attorney sent a disapproval of plaintiffs' contract to both plaintiffs' counsel and the broker (who was a duel agent represented both plaintiffs and seller) during the attorney-review period. He sent the notice via email, which plaintiffs' counsel and the agent acknowledged receiving within the attorney review period. Nonetheless, plaintiffs claimed that the sellers were bound by the contract and had to sell to his clients because the disapproval was not sent in the proscribed manner — by certified mail, telegram, or hand delivery.

Plaintiffs sued, seeking specific performance. Both sides moved for summary judgment. The Chancery Division granted defendants' motion and dismissed the complaint. The Chancery Division held that, while seller did not comply with the method-of-delivery requirements set forth in the contract, this breach was only "minor" because plaintiffs' counsel acknowledged receiving the notice within the attorney review period. Therefore, the Chancery Division held that the "underlying justification for the attorney review clause" — to protect parties against being bound by broker-prepared contracts without the opportunity to review them with their attorneys — was accomplished.

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Back to Basics: Personal Guaranty Not Enforceable Without Consideration

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Gas pump
Sometimes the most basic things can cause the biggest problems. One of the first lessons learned in the first year of law school is that a valid contract requires consideration – some benefit flowing to each side of the deal. In M. Spiegel & Sons Oil Corp. v. Amiel, the Appellate Division reminded us how failing to satisfy this basic requirement can derail an otherwise seemingly straightforward matter.

In Spiegel, defendants were two individuals who formed an LLC that operated two gas stations. The LLC purchased fuel oil from plaintiff. By March 2012, however, the LLC allegedly owned plaintiff more than $1 million for fuel oil deliveries, therefore plaintiff stopped making deliveries. Shortly thereafter, plaintiff entered into an agreement with the LLC pursuant to which the LLC agreed to make regular monthly payments to plaintiff to resolve its debt. As part of the agreement, the LLC entered into a promissory note with defendants for the full amount of the debt. Defendants were never asked to, and never agreed to, provide a personal guaranty in connection with the promissory note. But, shortly after the promissory note was signed, plaintiff asked defendants to sign a personal guaranty, which they did.  

The LLC eventually defaulted on the promissory note, and plaintiff sued defendants to recover on the personal guaranty. Both sides moved for summary judgment. The only fact issue that either side raised was whether there was adequate consideration for the personal guaranty. Plaintiff asserted that the personal guarantee was provided to induce plaintiff to continue to supply fuel oil to the LLC’s gas stations, therefore there was adequate consideration and the guaranty should be enforced. Defendants countered that, by the time the personal guaranty was presented to them, the LLC had already made arrangements to purchase fuel oil from a new supplier and therefore the personal guaranty was void for lack of consideration.

The trial court granted plaintiff’s motion and denied defendants’ cross-motion, holding that the guaranty was “clear and direct,” and that the “‘forbearance of the plaintiff to forego collection of the full amount’ and to ‘span out a payment plan’” provided adequate consideration. Defendants appealed and the Appellate Division reversed.

 

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When Was The Last Time You Sent A Letter Via Telegram?

Telegram (PD)
I have never sent a telegram and would not know how to send one even if I wanted to. But, if you are so inclined, there is a somewhat quirky provision of New Jersey real estate law that would allow you to dust off your telegram machine and send one. This provision was the subject of a recent Appellate Division decision, Conley v. Guerrero, that attracted significant attention from the real estate community and may end up before the New Jersey Supreme Court. 

Anyone who has bought or sold real estate in New Jersey is familiar with "attorney review." When you buy or sell a house, you sign a contract that is almost always prepared by a broker. The contract must contain a standard provision stating that the buyer and seller have the right to have an attorney review the contract. This "attorney review" period lasts three days. The contract becomes legally binding if, at the end of that three-day period, neither the buyer's nor the seller's attorney disapproves of the contract. If either side disapproves, their attorney must notify the other side's broker by "certified mail, telegram or by delivering it personally." The attorney must also notify the other attorney (or the party itself if they are not represented), but the law does not specify the manner in which this notice must be delivered. (Stay tuned for more on this later!)

In Conley, plaintiffs signed a form contract to purchase a condominium unit from sellers. It contained the standard "attorney review" provision. After signing the contract, but during the attorney review period, sellers received competing offers to purchase the property and eventually entered into a new contract to sell it to a new buyer for a higher price. Sellers' attorney therefore sent a disapproval of plaintiffs' contract to both plaintiffs' counsel and the broker (who was a duel agent represented both plaintiffs and seller). He sent the notice of disapproval via email, which plaintiffs' counsel and the agent acknowledged receiving within the attorney review period. Nonetheless, plaintiffs argued that the notice was ineffective because it was not sent in the proscribed manner — by certified mail, telegram, or hand delivery.

Continue reading “When Was The Last Time You Sent A Letter Via Telegram?”