Legal Question in Business Law in California
I purchased a corporation a few moths ago. There is an agreement for the purchase of the stock sale along with pledge agreement, promissory note (previous owners carry loan note) and a non compete agreement. A couple months into taking over the business I started noticing problems. I have a pretty long list off breaches with the contract including financials, and violation of non compete. My question is regarding my most resent discovery of a loan/lease the previous owner took out under the corporation during the time of our sale, the loan/lease is for equipment used for their new business and would not be anything my business would use, this loan/lease was hidden from me and never disclosed. Would this be considered fraud, misrepresentation, and could the agreement be cancelled? Could I recover my costs and expenses? I know it is hard not knowing all details but any help is appreciated.
1 Answer from Attorneys
It is not possible to answer your question without reviewing the contract for the purchase of the business, discussing the negotiating history with you, and seeing what you have discovered. You would also not want advice on your specific situation in a public forum, since it would be the subject of discovery in any litigation about this problem.
As a general rule, however, a false statement that you relied upon in the course of the purchase of a business, or an intentional failure to disclose something that was supposed to be disclosed, can constitute misrepresentation. Your right to recover attorneys fees may depend on the language of your agreement.
You need to speak to an attorney who handles business disputes, including breach of contract and fraud claims. You should bring the agreement as well as some basic documents about the problems you have found. You can find an attorney here on LawGuru, or you can see if the bar association for your county and area can make a recommendation. You may also want to speak to people you know for a referral.
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