Legal Question in Business Law in Pennsylvania
Accepting gift cards
We bought a turn key restaurant with a lease agreement and a very short sales agreement on which the agreement states restaurant is ''sold as is''. We have changed the name of the restaurant. There is no disclosure about gift cards sold from the previous owner however they have the $55,000 money from the sales.We found this out a month into being new owners. After the 1st month of accepting $4000 of gift cards , we asked the previous owner for the money. They said they keep the money while it costs us labor, food,etc.. We have stopped accepting gift cards while we try to have meetings with the old owners to no solution is reached. Are we obligated to take these gift cards and are we entitled to the money from gift cards?
2 Answers from Attorneys
Re: Accepting gift cards
You asked about accepting gift cards sold by the former owners of your business.
The answer very much depends on the on the terms of the sale. If the restaurant was organized as a corporate entity and you bought the entity you have also purchased the liabilities of that entity. If the restaurant was not organized as an entity and you bought the assets you probably did not buy the liabilities.
Seems you have two main options. 1) Do not honor the gift cards. 2) Honor the gift cards. If you choose 1 that may hurt your customer base and give you a bad reputation. Or you could print up a form letter explaining why you do not honor the gift cards and provide the old owner's address and phone so the holder's can seek a refund. Or 2 you could honor the gift cards and seek legal recourse against the old owner of the business as an undisclosed liability.
I agree with you that it was a cheap shot for the old owner to pull. There's nothing to say he didn't give out gift cards like candy. This is a prime example why people need to consult lawyers before entering a transaction rather than after a transaction has been finalized. It often costs much less to engage a lawyer to prevent such a mess than it does to clean up after the mess.
No matter what you need to do what is best for your business.
Regards,
Roger
Re: Accepting gift cards
The answer really depends upon the full terms and conditions of the sales agreement you signed, as well as what terms the gift cards were originally sold under. I'd need to review these provisions to give you a definitive answer. Feel free to contact my office for additional information.
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