Legal Question in Business Law in California

Binding Business Contract

We bought a business one year ago this may. We have copies of 4 previous business years, 96 - 99, from their accountant. Going on these figures, we decided to buy this business. A contract was written by seller which included full purchase price, amount down, and tentative monthly payment. No banks etc, were involved. The yearly statements stated that this business averaged $20,000 per month. After owning it for a year, we bearly made $30,000 for whole year. Large building was built in front of our store, and it was not stated in lease we signed HELP


Asked on 4/28/01, 8:57 pm

3 Answers from Attorneys

Ira Harris Law Offices of Ira James Harris

Re: Binding Business Contract

The factual situation you describe presents potential causes of action for fraud and deceit (negligent if not intentional misrepresentation) and possibly negligence and breach of fiduciary duty (if you were represented by an agent such as your CPA). How did you find out about the business opportunity? What was represented regarding the income and expenses? Were these figures accurate? What level of investigation did you conduct? Have you had the business appraised?

These are all questions that will need to be asked before anyone can tell you whether or not you have a case. If you are in northern California, I will be happy to talk to you about these matters.

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Answered on 6/18/01, 10:22 pm

Re: Binding Business Contract

The situation that you describe sounds like you have a valid cause of action against the seller. There are some questions raised by the information at the end of your question regarding the large building being built that blocked your curb appeal.

I would be happy to discuss this matter with you.

J. Caleb Donner

805-494-6557

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Answered on 6/21/01, 3:16 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Binding Business Contract

If the figures were falsified, you have a strong case against the seller and/or the accountant.

If you signed a lease for a store and the landlord knew but didn't disclose that you would lose street visibility, you have a moderately good case against the landlord.

What is the connection between the purchase of the business and the signing of the lease? Are the seller and the landlord the same, or related parties?

Are the figures you mention ($20,000 and $30,000) gross sales or net profit figures? Net profit is much more dependent upon the talents and experience of the owners/managers and also just generally more subject to fluctuation. Hence if your case is based upon a profit rather than a sales shortfall, it will be more difficult to pin the blame on the sellers in court.

Have you discussed your dissatisfaction with the sellers? What do they say? What kind of accountant was used -- a CPA or just a bookkeeper? Were the results audited, or just informally prepared?

If the matter went to court, the extent of independent inquiry you made would be a factor, as would the accuracy, candor and completeness of responses the sellers made to your inquiry.

If the business is in my area and you wish representation, please contact me for a free in-person consultation.

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Answered on 6/18/01, 1:18 pm


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