Legal Question in Business Law in California

Re: Buyer misled by seller of business

You probably have recourse against the seller for breach of contract, breach of implied warranty, and perhaps fraud; possibly other causes of action.

The strength of your claim and the nature of the charges you could make would depend rather heavily upon the business-sale agreement. It is customary in such agreements for the seller to warrant that all liens have been disclosed, usually in writing; also, that the books accurately reflect the financial condition of the business. The more representations and warranties that were untrue, the stronger your case.

I take it "SBA" means the Small Business Administration, which has guaranteed a loan but either it or the actual lender or both have a lien (security interest) in the equipment. You should check with the Secretary of State to verify this and to see what other security interests have been filed against the seller or the business. Be sure to cooperate with the SBA; they can be a tough adversary if they think you're involved in trying to circumvent the lien or the restriction on sale. Make sure they agree that you're an innocent victim.

If the amount of money is significant, and it probably is, you should get a lawyer with experience in commercial lending or UCC-1 secured transactions.

Re: Buyer misled by seller of business

You just bought a lawsuit; you should hope the seller has assets to collect against. You start by making a demand for him to pay the lien, and sue if not done. Feel free to contact me if you need legal help.

Re: Buyer misled by seller of business

Your recourse is a lawsuit, if you can't work anything out with the seller. You may be able to rescind the contract or get damages from the seller. Feel free to contact me if you'd like to discuss this further.