How Unwritten Agreements Lead to Litigation: Lessons from the Statute of Frauds
- Peter Lamont, Esq.
- Jul 25
- 7 min read
How Unwritten Agreements Lead to Litigation: Lessons from the Statute of Frauds
Not Every Deal Is Enforceable Just Because It Was Made
Business owners often operate with the belief that a handshake, email exchange, or verbal promise is enough to form a binding contract. While that may be true in some circumstances, it is not true in all. Under New Jersey law, certain types of agreements are not enforceable unless they are reduced to writing and signed by the party against whom enforcement is sought. This requirement stems from a centuries-old legal doctrine known as the Statute of Frauds, codified in New Jersey at N.J.S.A. 25:1-5.
Litigation over unwritten agreements is common, and in many cases, entirely avoidable. Business relationships deteriorate. One party claims there was a binding agreement. The other denies it or insists that the deal was never finalized. Without a written and signed contract, the plaintiff is often left trying to prove the existence and terms of an agreement that the law does not recognize as enforceable. The result is prolonged litigation, lost revenue, and exposure to unnecessary legal risk.
What the New Jersey Statute of Frauds Requires
N.J.S.A. 25:1-5 identifies specific categories of agreements that are not legally enforceable unless they are in writing and signed by the party to be charged. In the business context, the most relevant include:
Agreements that cannot be performed within one yearIf the agreement, by its terms, cannot be fully performed within one year of its making, it must be in writing. The statute applies only where performance is objectively impossible within a year—not merely unlikely or inconvenient. An oral agreement to provide services for five years, for example, is unenforceable absent a writing.
Contracts for the sale of real estate or any interest thereinAny agreement involving the sale, transfer, or conveyance of real property, including leases exceeding three years, must be in writing. Oral agreements to buy or sell land are unenforceable under the statute, even if a deposit was paid, unless an exception applies.
Agreements to answer for the debt or obligation of anotherThis applies to guarantees and surety agreements. If one person or entity agrees to be responsible for the debt or default of another, that promise must be in writing. This rule is strictly enforced, particularly in commercial finance and vendor credit contexts.
Contracts made upon consideration of marriageWhile rarely litigated in business disputes, prenuptial agreements and other marriage-related financial arrangements fall under the statute and must be in writing to be enforceable.
Agreements to lend money or extend credit in excess of $100,000In commercial lending, oral agreements to lend money or modify credit terms above this threshold are not enforceable. Lenders and borrowers alike must document their agreements clearly and formally.
Partial Performance and Other Exceptions
New Jersey courts recognize limited exceptions to the Statute of Frauds, but those exceptions are narrowly applied. In some cases, partial performance of an oral agreement may allow enforcement, particularly in real estate transactions, if the performance is unequivocally referable to the agreement and not otherwise explainable. For example, if a buyer takes possession of the property, pays a significant portion of the purchase price, and makes substantial improvements, the court may enforce the agreement despite the lack of a writing.
Another potential exception arises under the doctrine of promissory estoppel, where one party reasonably relies on an oral promise to their detriment. However, courts are reluctant to use estoppel to override the statutory writing requirement unless there is clear evidence of fraud, substantial reliance, and injustice that cannot be remedied otherwise.
These exceptions should not be viewed as reliable fallback positions. They are difficult to prove, require fact-intensive litigation, and offer no guarantee of success.
What Happens When There Is No Written Agreement
When a dispute arises over an unwritten agreement that falls within the Statute of Frauds, the defending party will typically raise the statute as an affirmative defense. If the agreement is one that must be in writing under N.J.S.A. 25:1-5 and there is no such writing, the court will not enforce the agreement, regardless of whether there was mutual assent or partial performance. The claim is barred.
In litigation, this often results in the dismissal of breach of contract claims at the summary judgment stage. Courts apply the statute rigidly. No amount of oral testimony, emails lacking signatures, or business history can substitute for a signed written agreement where one is required.
The Risk of Proceeding Without a Signed Contract
The business implications of relying on unwritten agreements are substantial. In many cases, one party believes they have a binding deal and begins performance, delivering goods, rendering services, or reserving resources, only to later find the other side has backed out or denied the deal altogether. At that point, there may be no enforceable contract, no clear terms to point to, and limited remedies.
Even where litigation is initiated, the lack of a signed writing places the plaintiff at a severe disadvantage. The focus shifts from enforcing known terms to litigating over whether an agreement existed at all, what it allegedly included, and whether any exceptions apply. That is an expensive and uncertain path.
Conclusion
Under New Jersey law, certain agreements are unenforceable unless they are in writing and signed by the party to be charged. This includes long-term service contracts, real estate deals, large credit agreements, and personal guarantees. The Statute of Frauds is not a technicality—it is a legal bar that will defeat an otherwise valid claim if the contract is not properly documented.
Business owners must take these requirements seriously. Always memorialize key agreements in a written, signed document before relying on performance or making financial commitments. In commercial litigation, the absence of a signed contract may not just complicate your case it may destroy it.
For more information about your legal rights or to schedule a consultation, please contact the Law Offices of Peter J. Lamont at www.pjlesq.com, call 201-904-2211, or email info@pjlesq.com.
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About Peter J. Lamont, Esq.
Peter J. Lamont is a nationally recognized attorney with significant experience in business, contract, litigation, and real estate law. With over two decades of legal practice, he has represented a wide array of businesses, including large international corporations. Peter is known for his practical legal and business advice, prioritizing efficient and cost-effective solutions for his clients.
Peter has an Avvo 10.0 Rating and has been acknowledged as one of America's Most Honored Lawyers since 2011. 201 Magazine and Lawyers of Distinction have also recognized him for being one of the top business and litigation attorneys in New Jersey. His commitment to his clients and the legal community is further evidenced by his active role as a speaker, lecturer, and published author in various legal and business publications.
As the founder of the Law Offices of Peter J. Lamont, Peter brings his Wall Street experience and client-focused approach to New Jersey, offering personalized legal services that align with each client's unique needs and goals.
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