Legal Question in Business Law in California

Close my bank account to stop the check, am I doing right?

I want to buy a existing business, but the seller fooled me, she wanted me to pay cash to buy the business and no escrow.

I gave her check as deposit(partial payment), then I found out she is not reliable, suddenly I wake up, I immidiately went to bank to close my account, fortunatly she hasn't taken my money.

We don't have any sale agreement, she did is totally wrong, she shouldn't deposit my check, the transcation was not complete.

Does she has right to collect money from me? What else should I do to protect myself?

Anyway, I also found out she did illegal work, can I report it? to who?

Thank you for answer.


Asked on 4/12/12, 11:08 am

2 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

There are limited circumstances in which it is OK to "stop payment" on a check. Usually this is done by visiting the bank to give them a stop-payment order, and it is also necessary to notify the party to whom the check was written. This is all covered in the California Civil Code, in its section 1719. A stop-payment order is permitted when you have a "good-faith dispute" with the person to whom the check was given. You may indeed have a good-faith dispute, but closing your account and failing to notify the other party are not the right way to handle the dispute.

I advise you to see a business lawyer to assist you on the entire transaction, including handling the check problem and advice on the business purchase (whether to go ahead with it, or how to cancel without liability, and your right to report "illegal work" the seller has done.

Purchase of a business without due diligence, without a careflly-written agreement, with cash, etc. is all too informal and hasty for the complexity and amount of money involved, and having expert legal guidance through the whole transaction will be well-worth the cost.

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Answered on 4/12/12, 11:37 am
Edward Hoffman Law Offices of Edward A. Hoffman

I agree with Mr. Whipple. The time to do your due diligence was before you made the deal, not after. Deciding afterwards that you shouldn't have made the purchase does not change the fact that you did make it, and it doesn't allow you to retroactively undo your deal.

Note that, while you claim you "don't have any sale agreement", you must have at least made an agreement orally. You obviously agreed on a purchase price, and on what you were purchasing. You may have agreed on many other points.

Many oral agreements qualify as binding contracts, but I would need to know more about yours before I could say whether it qualifies. Even if it doesn't, you might be bound for other reasons. Preventing the seller from getting her payment would then be a breach of your contract and she would be entitled to damages. Here again, I would need more facts before I could say how much she would be entitled to recover.

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Answered on 4/12/12, 11:57 am


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