Legal Question in Business Law in California

Re: Selling business

I assume you are the seller. The fact that the deal is in escrow and that the deposit is small is of rather small legal significance. The important fact is that you are in contract and backing out would be a breach of contract. Ordinarily when you are "in escrow," title has not passed and there remain papers to sign before title passes, so you can back out by refusing to sign whatever must be signed to cause title to pass to the buyer.

The consequence of doing so is that you will be in breach of contract, and the real question then becomes "what are the buyer's remedies?" The buyer is perhaps entitled only to money damages, and a judge or jury would have to determine the amount; but it's quite possible the buyer might be entitled to the remedy of specific performance, in which case you, the seller, would be ordered to carry out the contract specifically. In other words, you could perhaps be ordered to sell as per the contract.

Specific performance is more likely to be decreed if the business is unique and not easily duplicated, such as, perhaps, a famous restaurant or manufacturer owning valuable trade secrets,patents or territorial rights.