Legal Question in Business Law in California

Emails and any other written communication would need to be reviewed before determining your risk. You cannot prevent the partner from initiating a law suit (anyone can sue anyone...and in LA they frequently do), but whether it is a credible law suit depends on the evidence. You should consult with an attorney, especially if you receive something in writing from the disgruntled partner.

Oral agreements are as valid and enforceable as written ones, with some limited exceptions, but more difficult to prove in court. If the potential partner lost money as a result of relying upon a promise from you, you may be sued for their loss. If, in turn, you were acting upon instructions from your client when you made deals, you should be held harmless and could cross-complain for some kind of damages or indemnity.

#1: Notwithstanding your title as "Project Manager" it doesn't sound like you had authority to sign a contract on behalf of your client or to bind your client.

#2: Sounds like terms were negotiated and possibly agreed upon by a signatory, the potential partner, and you as agent for the other signatory. If you advised your potential that you have to run this by the client, who is the only one authorized to be bound by the contract, then your potential partner most likely was on notice that there is no deal until the main signatory with authority to sign has actually signed.

#3: There is a question as to how reasonable it would have been for the potential partner to rely on an unsigned agreement to his/her detriment. While "oral agreements" may be binding in certain situations, it is less likely when the parties are working on terms to be put in a written agreement, a written agreement exists and parties are awaiting signatures. Conduct of the parties will be an issue.

Should you be worried? Maybe. But the potential/spurned partner has the uphill battle here.

As a franchise attorney I say listen to what the other attorneys say and follow their advice. Bottom line to me is the deal was still pending with the client, who could have decided either way. Client decided to go with another partner. That's a risk in any business deal. If the potential partner is upset, so be it - that's the way things go in the business world. If they want to waste their time and money bringing a suit against you, for a deal that was just pending, your client definitely made the right decision to go with the other partner. That's my take. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Attorney

Franchise Foundations APC