Legal Question in Business Law in California

Re: Verbal breach of contract

Verbal agreements can be enforced, if you can establish what the terms were. With one partner supporting you, that should be possible, plus there should be various memos and paperwork showing some of the agreement, and there are probably other witnesses to support your claim. Your remedy is to hire an experienced attorney, have him try to negotiate an acceptable outcome for you, but you may have to sue to enforce your recovery rights. Feel free to contact me if interested.

Re: Verbal breach of contract

Pete, this is oblawyer (Ocean Beach) Lawyer. I am experienced 18 years strong in Partnership Dissolutions and have seen positive results. Please call me directly at 16192223504.

Re: Verbal breach of contract

Verbal agreements CAN be enforceable. However, you run into difficulties as to what the agreement actually consisted of since the terms were not in writing.

Also it sounds like there is going to be difficulty in determining whether there is actually an agreement since one of the partners is denying it.

You definitely need to sit down with an attorney and run through options available.

I would be happy to discuss the matter with you.

Re: Verbal breach of contract

A few of the facts are unclear, but the answer to your question is that in California, an oral contract is just as enforceable as a written contract, except in certain statutorily defined situations. This does not appear to be one of those situations. Thus, the oral contract is enforceable.

However, what are the terms of that contract? You have a problem on your hands, because two of the three partners agree on the terms. In situations such as these, where the parties disagree on the terms of the agreement, the court will permit the parties to introduce evidence of what they believe the terms are. You will introduce letters, emails, and any other documentary proof to show the terms of the contract. You will also have your testimony as well as the other partner who agrees with the terms.

In the absence of a formal written agreement, it is likely that the law will treat all three of you as implied partners: you went into business together, invested together, etc. The law will imply a variety of things to this relationship.

The legal issues can become complicated in such a situation, and even more so, without a written agreement. If the company is set up as a valid corporation or similar structured entity, you might consider suing to dissolve the company as well as for damages.

Seek out the advice of a competent civil litigator. We are attorneys familiar with business litigation and if you need further advice specific to your factual situation, please feel free to call or email.

Good luck.

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Re: Verbal breach of contract

Pete, I believe that you will find that it will end up as a dissolution action even if you call it a corporation. The assets need to be redistributed, or the threat to do so will cause movement.

Re: Verbal breach of contract

Step one in analyzing your legal situation is to be clear whether the three of your are partners in a general partnership or stockholders in a corporation. Your terminology is mixed, which may have confused the other answering attorneys.

If the business hasn't been incorporated, it is probably a partnership. The California Uniform Partnership Act of 1994 sets down fairly strict and comprehensive rules for determining what is a partnership and how the partners must behave with respect to one another and toward the partnership, as well as how partners may withdraw and when and how the partnership is dissolved, wound up and terminated. Oral partnership agreements are enforceable, and as long as the partnership business continues, there is no time limit of their enforcement.

More likely, however, this is a corporation. It sounds like one that it badly run. Your first step should be to check the Secretary of State's Web site at www.ss.ca.gov to see if its name is registered. You can also request copies of corporate filings, such as the Articles of Incorporation and lists of the directors and officers.

A corporation is required to have an annual meeting of shareholders, at which directors are elected. The directors then appoint the officers and set policies, while the officers run the company on a day-to-day basis. In small corporations, the same people are usually both the officers and the directors, but not always.

The right to elect directors is related to number of shares owned. There are two voting systems in common use, "direct" and "cumulative." Corporations adopt and are governed by bylaws.

Stockholders have the right to examine the list of stockholders, minutes of shareholders' and board meetings, bylaws, tax returns and other corporate records.

All corporations must file annual tax returns. Many, maybe most, small corporations elect the be "S" corporations for tax benefits. Every shareholder must be furnished a Schedule K-1 once a year showing his/her allocation of profits and losses for filing their individual tax returns.

If you invested $1.2 million in this company without any paperwork, you need a lawyer right away! Your investment is in jeopardy. Fortunately, your rights will survive the 2-year statute of limitations for most oral contracts for a number of reasons, including the paper trail any business generates, part performance, and laws for the protection of business investors, partners and shareholders.

Please feel free to contact me; I handle contract and business dispute matters statewide.