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Business Litigation — Disputes Arising from Sales of Businesses

On Behalf of | Jul 13, 2015 | Business Litigation

Buffington Law Firm’s business litigation team has handled numerous breach of contract lawsuits arising from the purchase and sale of small businesses.  One of the most common scenarios for breach of contract and business litigation disputes derives from transactions involving the purchase and sale of a small business.  Many Americans dream of financial independence through ownership of one’s own small business.  Buying a small business, perhaps through a business broker, often appears to be a quicker way of realizing this dream than starting one’s own business from scratch.  And indeed, it can be.

Few business transactions are more likely to give rise to business litigation disputes than the sale of a small business.  Sometimes the new owner finds that the business simply is not as profitable as the seller represented to him or her.  There can be many causes for this.  Sometimes the new owner is simply not as proficient at running the business as was the original founder.  It is not uncommon in a start-up business that the books and records are less than perfect to the extent that neither the buyer or the seller is really sure what the true results of the businesses operations are.  This can result in a disappointed buyer who believes that the seller was less than forthright.  The result can be either the buyer defaulting on a promissory note that was a component of the purchase price (and the seller suing on the note) or the buyer simply initiating litigation for breach of contract and possibly fraud.

Allegations of fraud in the context of small business sales are very common.  Under California law and the law of most states, a claim of fraud lies where there is a material misstatement of fact, or an omission of material fact.  The other elements of a fraud claim are reasonable reliance by one party, and damages arising from the reliance.  [See generally Cal. Civil Code Sections 1709-1710].  The applicability of fraud as a cause of action to small business sales gone awry is therefore obvious.  Most lawsuits deriving from disputes over small business sales involve claims of breach of contract and fraud.

Even in modest business sale transactions the stakes involved in a lawsuit of this type can be high.  Often the purchase and sale agreement provides that in the event of litigation, the winner can recover attorney’s fees from the loser. Further, if fraud is proven by “clear and convincing evidence” evidencing oppression, malice, or fraud, the winner may recover punitive damages in addition to actual damages deriving from the transaction.  If you are involved in a dispute over the sale of a business, it is important that you secure competent, experienced attorney representation.

Buffington Law Firm’s business litigation team is very experienced in litigation deriving from small business sales.  If you are involved in such a dispute, you cannot do better than to call our office for a free legal consultation.  In this meeting you can discuss your case with an experienced attorney, and there is no obligation.