Legal Question in Business Law in California

Business giveaway

I and a business partner had a business that was failing but still had good clintele, we got ourselves into debt so we decided to try to find someone that wanted to buy the business from us. We found an individual that was willing to take the business from us as well as past clients that we still owed product and services to in exchange he would get the business with no initial investment, he would maintain all furnishings in the store (about $10,000 worth) and after a period of time he would pay us monthly a percentage of sales.We drew up a contract on the computer, and I took it to the third person to sign it and left it in his office as he was not there. We discovered he wasn't intent on signing but had already taken possession of the rented space and began running the business. Shortly after this took place we started getting complaints from customers that he wasn't honoring our commitment to them and they snowballed to where we could not focus.We left the business in March of 2002 and are just now able to focus on this situation. The minimum we want is to at least get our furnishings back,is it too late? The way I see it without a signed contract he has no right to the furnishings, can we just walk in and take it?


Asked on 11/06/02, 12:43 pm

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Business giveaway

Your set of facts sounds like a good Bar Exam question. There's plenty of blame to go around, including turning your backs when the going gets rough, but you may be able salvage something from the messy situation.

First, just because the contract wasn't signed doesn't mean there is NO contract between the parties; there may be an oral contract or perhaps a so-called 'contract implied in fact.' Beyond that, there could be a 'contract implied in law' or as it is also known, a 'quasi-contract.'

Further, there are statutes that apply, including California partnership law and laws relating to sale of businesses ('Bulk Sales') and to abandoned property.

Although you and your partner may not have a large stake in this situation or a lot of cash to invest in lawyers and accountants, and I don't know anything about your other personal affairs such as whether you have other assets outside this business at risk, I think you should consider having a lawyer go over all the facts and assist you in disentangling yourself. You may get enough property back, or avoid enough other problems, to make it worthwhile.

Your problems may include:

(1) The partnership or other business arrangement you have with the other original owner of this business.

(2) Your obligations to the business' landlord.

(3) Your obligations to clients and suppliers.

(4) The legal nature of your relationship to the 'buyer' or whatever he is who took over.

(5) Other loose ends related to the business.

Read more
Answered on 11/06/02, 1:52 pm
Adam Telanoff Telanoff & Telanoff

Re: Business giveaway

You have a heck of a problem.

Although there is no signed document, you probably have an enforceable agreement. The "buyer" probably has obligations to everyone you owed money to, but that doesn't necessarily get you off the hook.

As to getting the equipment back yourself, you probably cannot get it back on your own, unless the third party agrees to give it back. There are circumstances in which you would be able to reposses the equipment yourself, but that requires a security agreement.

You are probably going to need to talk to an attorney and tell him your whole situation.

Read more
Answered on 11/06/02, 2:01 pm


Related Questions & Answers

More Business Law questions and answers in California