Law School Case Brief
Howard M. Schoor Assocs., Inc. v. Holmdel Heights Constr. Co. - 68 N.J. 95, 343 A.2d 401 (1975)
When the leading object of the promise or agreement is to become guarantor or surety to the promisee for a debt for which a third party is and continues to be primarily liable, the agreement, whether made before or after or at the time with the promise of the principal, is within the Statute of Frauds, and not binding unless evidenced by writing. On the other hand, when the leading object of the promisor is to subserve some interest or purpose of his own, notwithstanding the effect is to pay or discharge the debt of another, his promise is not within the statute.
Plaintiff creditors provided professional services to a business in which defendant debtor held a large interest. They maintained that he personally guaranteed payment. Defendant argued that if there was such an agreement, it was unenforceable under the Statute of Frauds, N.J. Stat. Ann. § 25:1-5. After a non-jury trial, a judgment was entered in plaintiffs' favor. The intermediate appellate court reversed that judgment because it found that any agreement was not enforceable under the Statute of Frauds. Plaintiff creditors appealed, maintaining that the intermediate appellate court erred when it concluded that the parties' contract was unenforceable under the Statute of Frauds.
Was the contract unenforceable under the Statute of Frauds?
The Supreme Court of New Jersey reversed the intermediate appellate court's decision and reinstated the trial court's judgment. The court stated that there was sufficient evidence to support a conclusion that an agreement existed between the parties. However, the court also stated that only a written guaranty could be enforced under the Statute of Frauds. The court noted that an agreement was not considered a guaranty when it furthered a significant pecuniary interest of the party to be charged. Given defendant's substantial interest in the business, the court found that the parties' agreement furthered such an interest. Thus, compliance with the Statute of Frauds was not needed.
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