Friends and family members routinely loan each other money — at times considerable sums of money — for working capital or for other needs on the basis that the trusted borrower will repay the loan as soon as he or she is able to do so. A recent New Jersey Appellate Division decision has affirmed that these informal loans are enforceable in New Jersey.

Brown Moskowitz & Kallen’s Kenneth L. Moskowitz and Michele-Lee Shapiro recently represented a lender who made a pay-when-able loan in a very substantial amount to a close friend who was in desperate need of funds to keep his diverse business interests afloat. In August 2023, on plaintiff-lender’s action to enforce repayment of the loan, a Bergen County Superior Court entered Final Judgment in favor of the plaintiff. The trial court held that pay-when-able loans are legally enforceable in New Jersey and that the plaintiff’s cause of action accrued when the defendant admitted to plaintiff his ability to repay the loan. The trial court’s 63-page opinion was replete with findings that the defendant’s testimony was not credible, and the court rejected all of defendants’ arguments seeking to avoid repayment of the loan.

On November 19, 2024, the New Jersey Appellate Division affirmed the Superior Court’s decision in a unanimous opinion, holding that pay-when-able loans are “valid and enforceable in New Jersey.” The appellate court affirmed the trial court’s enforcement of plaintiff’s pay-when-able loan.

Should you have any questions concerning pay-when-able loans or other business disputes, we would be happy to speak with you at any time.

Kenneth L. Moskowitz is the Chair of the Litigation Department at BMK, and Michele-Lee Shapiro is Senior Counsel in the firm’s litigation group. Ken and Michele-Lee represent clients in a broad range of business disputes in state and federal courts, as well as in arbitration.