Legal Question in Business Law in California

Re: Stock purchase

Possibly there has been a sale of shares, but the check, as described, is not the transaction itself; it is at most evidence of a completed contract for the sale of shares.

A contract for the sale (or purchase) of shares, like a contract for the purchase or sale of almost anything, is not the paper itself. The contract is the agreement, the "meeting of the minds" of the parties on the subject matter. The writing is just evidence of the parties intent to do a deal.

Therefore, in order for you to prove in court that the owner has sold you shares in his business, you must show the judge or jury that there was, at some time, an understanding between you that you would pay $X and in return the owner would sell you Y shares in Z Corporation.

The check, thus inscribed, and its subsequent negotiation by the owner, is some evidence of a contract, but it isn't necessarily conclusive. The judge or jury would want to hear from both parties. One of the main problems here is that an essential term (how many shares?) seems to be missing. If there is additional evidence that your check was for Y number of shares, or a Y% stake in the corporation, you are a step closer to proving an enforceable contract.

You may be confusing your notated check with the "payment in full" check principle (Civil Code section 1526) under which a "payment in full" notation on a check can sometimes act to extinguish an obligation as a so-called "accord and satisfaction." The principle of an accord and satisfaction is not, however, the same as that of contract formation, and different rules of interpretation will govern whether your check is adequate proof of a contract.

Forming a contract requires an offer followed by an acceptance, but it also requires that the offeror and the offeree have the same deal in mind. That may indeed be the case here, but with major terms unspecified, the party alleging an enforceable contract will probably have to come up with additional proof, particularly as to the number of shares, but also there may be a question as to the identity of the corporation whose shares are involved, method of delivery, and so forth.

This is not to mention associated problems such as the legality of the proposed stock sale, and the duty of the owner to make restitution of the money paid if it is determined that there were no sale.

With more facts, such as negotiations between the parties, I could probably answer with a bit more certainty as to whether there is a contract here or not

Re: Stock purchase

You may have some kind of oral agreement to buy shares, but unless you and the company follow all the rules for purchase and issuance, you've got nothing but legal trouble. If you're serious about getting it done right, feel free to contact me for legal help.