Legal Question in Business Law in California

refund due?

I have bought failing ballroom dance studio as a 2nd location to my existent biz. The 2nd location was formerly a franchise school that sold pricy contracts with a 30-day refund policy. Our studio policy does sell ''contracts'', but sells singel hours or blocks of 5-10 hours at a time for 40% less than the former school did. A client is sueing us in small claims for a refund on his contract with the former studio. I have explained that we are willing to honor the lessons he purchased, but our biz. policy is that we do not refund. He is upset because we lowered the prices which he feels devalued his lesson package. He wants his lessons + the additional savings we now offer. Is this refund to him on payment we never recieved due by us?


Asked on 1/05/09, 1:55 pm

2 Answers from Attorneys
Edward Hoffman Law Offices of Edward A. Hoffman

Re: refund due?

If all you bought was the facility, you are not required to honor the prior business's obligations at all. If you bought the business itself, then you must honor its obligations regardless of whether they arose before or after your purchase.

That said, I don't see how the business could be liable to this customer. Businesses that reduce their prices are not required to give refunds to customers who paid the old price; indeed, such refunds are rare. Unless something in his contract with the business says he is entitled to get some of his money back (which is plausible; businesses sometimes choose to offer such guarantees), the court should rule in your favor.

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Answered on 1/05/09, 2:22 pm
Terry A. Nelson Nelson & Lawless

Re: refund due?

Whether you have any obligation to him depends upon the terms of your purchase agreement with the old studio. That is what you'll have to present and argue in court. Settle it if you can, or present your defenses to the judge.

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Answered on 1/05/09, 2:54 pm


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