Legal Question in Business Law in California

Breach of contract

Seller enter into contract with Buyer #1 to sell a business for $37,000. Buyer #1 made out a check for $500 as deposit, and a written a contract stating that ''Seller agreed to sell business to Buyer #1 for $37,000 and accepted $500 deposit as consideration.'' The next day Seller went to the bank to cash the check, only then found out that the check was post dated to one week from date. Seller were unable to cash check. That same day Buyer # 2 offer Seller $45,000 for the business and made a $2,000 cash deposit. Seller call the Buyer #1 and inform him that the check was not good, he will NOT be selling the business to him. Buyer #1 informed seller that he purchased $30,000 worth of equipment that will be installed into the business. He will be charged 30% restocking fee if this doesn't goes thru. Buyer #1 threaten to sue Seller for ''breach of contract''.

Where do Seller stand? Does Buyer #1 have a case?


Asked on 5/07/07, 4:38 am

2 Answers from Attorneys
Jeb Burton The Burton Law Firm

Re: Breach of contract

This is extremly complicated. The situation hinges on two things: 1) whether receiving the post dated check constituted acceptance of it as a deposit by the Seller; 2) whether the buyer has grounds for substantial reliance on the contract.

This would also depend on how quickly Seller called buyer after finding out the check was no good, and what eslse was involved in the written contract. I hesitate to substantiate an opinion on the merits of either Seller or Buyer #1 without further information in the case. I would urge you to seek assitance from an attorney that can review the contract and the timing.

Read more
Answered on 5/07/07, 12:42 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Breach of contract

This question seems to have been posted twice. Please see my answer to the later posting.

Seller (probably)loses in court for at least two separate reasons. First, Seller is presumed to have read the check and know the date, amount, the fact that it is signed. Thus Seller cannot rescind the contract with Buyer #1 on that basis. Second, Seller should have contacted Buyer #1 to return the check and notify Buyer #1 of the intent to rescind before accepting a deposit and making a deal with Buyer #2.

Yes, I'd say Buyer #1 has a case - not a sure thing, but based on these facts, a very strong case. Further, there is noting unusual or difficult about the facts presented - looks like a question for a first-year law school contracts exam.

Read more
Answered on 5/07/07, 1:50 pm


Related Questions & Answers

More Business Law questions and answers in California