Legal Question in Business Law in California

Re: Bought business. Not making $$.

I don't think your chances are very good - although they're not terrible - and here's why:

First, you have to convince the trier of fact (judge or jury) that the statement about $400 was made, against the seller's testimony that it wasn't made. You have the burden of proof. It's not a heavy burden, but nevertheless when you say "X" and the other party says "Y," it's a tossup and the burden of proof may not be met.

Next, even if you establish that the seller did say "$400," you're only to first base. To win a case for fraudulent misrepresentation you have not only to prove the defendant's representation; you must also prove that it was false when made; that the misrepresented fact was material rather than trivial; that the defendant knew or should have known that it was false; that it was said with the intention that you rely upon it; that you did rely upon it; that your reliance was reasonable in the circumstances; and that you were harmed by all of the foregoing.

If you can prove that the seller said "$400," I can see the seller throwing up defenses such as "Well, it was $400 when I ran the business!"

Or, he will argue that he was talking about gross sales, not net income. Or that he meant the most it had ever made in a day, not the average.

Also, the judge or jury might not think it reasonable for you to rely on an offhand number without asking more questions or asking to see the books.

What does the lawyer who sent the letter think of your chances? Without knowing more, I'd put your chances of winning a suit for fraudulent misrep. at around 30%. If you "won," your award of damages might be a lot less than $40,000, too.

Re: Bought business. Not making $$.

"I purchased a store based on trust. No papers to back up anything. Did not go through escrow company. No lawyer to review anything."

I couldn't have said it better myself.