A settlement agreement between parties to a lawsuit is a contract

Law Lessons from LARRY BIAGI v. DARRYL HILL and SHARON HILL, App. Div., A-4122-11T3, February 4, 2013:

“A settlement agreement between parties to a lawsuit is a contract.” Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (citing Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div.), certif. denied, 94 N.J. 600 (1983)). “As a general rule, courts should enforce contracts as the parties intended.” Pacifico v. Pacifico, 190 N.J. 258, 266 (2007). Consequently, “[w]hen the contract is silent, it is necessary to examine the pertinent provisions in the agreement and the surrounding circumstances to ascertain that intent.” Broadway Maint. Corp. v. Rutgers, State Univ., 90 N.J. 253, 260 (1982); see also Hall v. Bd. of Educ., 125 N.J. 299, 306 (1991) (“If contract terms are unspecific or vague, extrinsic evidence may be used to shed light on the mutual understanding of the parties.”); James Talcott, Inc. v. H. Corenzwit & Co., 76 N.J. 305, 312 (1977) (“We must ascertain the parties’ intention from a consideration of all the surrounding circumstances.”) (citing Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301-02 (1953)).

In determining the parties’ intent, courts “must consider the relations of the parties, the attendant circumstances, and the objects they were trying to attain. An agreement must be construed in the context of the circumstances under which it was entered into and it must be accorded a rational meaning in keeping with the express general purpose.” Tessmar v. Grosner, 23 N.J. 193, 201 (1957). “Even where the intention is doubtful or obscure, the most fair and reasonable construction, imputing the least hardship on either of the contracting parties, should be adopted, so that neither will have an unfair or unreasonable advantage over the other.” Ibid.

It is equally well settled that “[a] contract arises from offer and acceptance, and must be sufficiently definite `that the performance to be rendered by each party can be ascertained with reasonable certainty.'” Weichert Co. Realtors v. Ryan, 128 N.J. 427, 435 (1992) (quoting W. Caldwell v. Caldwell, 26 N.J. 24-25 (1958)). If the parties “agree on essential terms and manifest an intention to be bound by those terms, they have created an enforceable contract.” Ibid. On the other hand, if the parties do not agree on one or more of the essential terms of the contract, “courts generally hold that the agreement is unenforceable.” Ibid.; see also Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat’l Bank, 163 N.J. Super. 463, 474 (App. Div. 1978) (noting there is no contract when an agreement is “so deficient in the specification of its essential terms that the performance by each party cannot be ascertained with reasonable certainty”), certif. denied, 79 N.J. 488 (1979).

“Every party to a contract … is bound by a duty of good faith and fair dealing in both the performance and enforcement of the contract.”, Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005).

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