Legal Question in Business Law in Louisiana

Re: Depost put to hold the sale of business

Was the money given to you "in an attempt to have you not sell it to anyone else until the buyer got the money," or was the money given to you "to hold the property for the buyer while he got financing?"

If the money was given to you with the understanding that you would hold the property for the depositor until he could secure financing, when the financing fell through, and the time period you gave him to secure the loan has passed, then it appears you can keep the deposit as liquidated damages for his backing out of the deal.

Re: Depost put to hold the sale of business

The key to whether or not you need to refund the "deposit" is the understanding and/or agreement the two of you made prior to and upon receipt of that "deposit"--i.e., what did you both understand was to be the purpose of that money. Did the two of you sign anything?

Generally speaking, a deposit in a sale transaction is a pledge for "specific performance"--i.e., to guarantee that the person putting up the "deposit" will do what he promises or risk losing the "deposit". If he fails or refuses to do what he has promised, the person holding the deposit may generally keep that deposit since he had to wait, hold something rather than sell it to someone else, etc.

However, a deposit can sometimes be just an advance/partial payment for the whole purchase price, with the condition that it be refunded if the other conditions do not occur (e.g.,financing or favorable survey/inspection, etc.).

The key to your situation is what the two of you agreed upon or discussed when he gave you that money. If there was no discussion or agreement, it's going to be your word against his--whoever can ultimately prove their side of the story might be the winner in court, if it were to come to that. That will probably depend on the size of deposit--i.e., for a small amount of money, your former potential buyer may not be able to find/pay for an attorney and/or go to court; for a large amount of money, it may be worth it for him to take his chances to try and get the money back from you.

Good luck...