Business Buyer Backing Out

[JBH9457]

NJ

I am selling my business and have had it on the market for several months. Had several different offers and apparently the business was in great demand. One of the parties gave me 5000 dollars in the beginning of October to take the business off the market as they wanted to make sure they were a lock for the purchase, which I did. I asked them to have a contract drawn up prior to me accepting any sort of monies (to protect everyone's interest). They did not want to delay and expressed the contract was just a formality and they were more interested in preventing other buyers from taking "their" business. In any event, they wanted the transfer of ownership to take place no later than Nov 1.

On Oct 15ish I started to urge them to put something in writing. They claimed that their lawyer was on top of matters. It comes to light that they never had their attorney do a thing. Not a thing! Nov 1 was during the hurricane so obviously that date was not going to happen for a closing. I called literally every day inquiring as to the status.

Yesterday, I received a voice mail from the buyer stating that if I didn't accept a 50,000 reduction (35% reduction), he was not going any further and wanted his money refunded. Ironic since he didn�t do anything anyway.

Is he entitled to receive his money back? There was never any language written or spoken that allowed for the return. In fact, I was the one pushing for legal representation from the beginning so that something like this would not occur. They claimed the money handed over was to prevent further solicitation of my business and to ensure them that the pre negotiated sale price would be honored. Once again, they didn't want ANYTHING in writing.

So now I'm stuck with no buyers, a business that is prepared to be sold, staff that now knows the business is being sold, customers knowing, etc. In fact, the buyer has been running around town telling everyone that he's the new owner. He also had words with one of my staff which led to that employee walking out the door and never to be seen again.

Right is right and I plan on putting the business back on the market. Should I find a buyer at the same price, I will gladly return his money. If it�s at a lower price, I will gladly send him the difference.

Again, this was NEVER a traditional deposit; they just wanted to ensure that there was no longer any further solicitation. There were no contingencies. Nothing in writing that stated that in the event... To be honest, I never would have never taken the business off the market if I believed that their money was refundable just because they changed their mind. Of course now, they are claiming it was a deposit to bind a contract. There was never a contract to bind. I wanted one, but they did not (for whatever reason).

I'm disgusted at how these people operate and can't help but feel as though this was a strategic move on their part.

Can someone please tell me my options? Thank you.

 

[OHRoadwarrior]

Tell him he paid for the option to be the sole buyer of the business until Nov. 1st. His option expired. You will use his lost option money to cover expenses and re-market the business.

 

[Mass_Shyster]

Put the business back on the market. Sue him for any additional expenses incurred and any necessary reduction in selling price, minus, of course, the deposit.

If you end up selling for the same price, and incur less than 5K in costs, refund the difference.

 

[tranquility]

Put the business back on the market. Sue him for any additional expenses incurred and any necessary reduction in selling price, minus, of course, the deposit.

If you end up selling for the same price, and incur less than 5K in costs, refund the difference.

Sue him for what? Breach of contract?

Do you think the OP is going to successfully prove up a verbal contract for the sale of a business of around $150K? I'm thinking the money to sue on that contract is just flushed down the lawyer drain. (Not that there is anything wrong with that.)

Now, if the OP has real damages, he might try an intentional misrepresentation lawsuit, but even that seems a bit speculative. Hope is not a contract, nor is the puffery of a potential suitor a tort. This lawsuit would be a dog under any circumstances. Can we make an argument? Sure. But since we don't even have a time of performance promise and the sale of a business is far more difficult than the sale of a widget, I suspect there is nothing. (Who gets the liabilities? Are there personal guarantees? Can the OP start his own business to compete? What if there is a tax owed for the prior year? We could go on.)

About the $5k, I'd go with OHRoadwarrior's option contract theory. Even if the OP cannot produce a writing, I'd say we could go with an option by promissory estoppel.

 

[LdiJ]

NJ

I am selling my business and have had it on the market for several months. Had several different offers and apparently the business was in great demand. One of the parties gave me 5000 dollars in the beginning of October to take the business off the market as they wanted to make sure they were a lock for the purchase, which I did. I asked them to have a contract drawn up prior to me accepting any sort of monies (to protect everyone's interest). They did not want to delay and expressed the contract was just a formality and they were more interested in preventing other buyers from taking "their" business. In any event, they wanted the transfer of ownership to take place no later than Nov 1.

On Oct 15ish I started to urge them to put something in writing. They claimed that their lawyer was on top of matters. It comes to light that they never had their attorney do a thing. Not a thing! Nov 1 was during the hurricane so obviously that date was not going to happen for a closing. I called literally every day inquiring as to the status.

Yesterday, I received a voice mail from the buyer stating that if I didn't accept a 50,000 reduction (35% reduction), he was not going any further and wanted his money refunded. Ironic since he didn�t do anything anyway.

Is he entitled to receive his money back? There was never any language written or spoken that allowed for the return. In fact, I was the one pushing for legal representation from the beginning so that something like this would not occur. They claimed the money handed over was to prevent further solicitation of my business and to ensure them that the pre negotiated sale price would be honored. Once again, they didn't want ANYTHING in writing.

So now I'm stuck with no buyers, a business that is prepared to be sold, staff that now knows the business is being sold, customers knowing, etc. In fact, the buyer has been running around town telling everyone that he's the new owner. He also had words with one of my staff which led to that employee walking out the door and never to be seen again.

Right is right and I plan on putting the business back on the market. Should I find a buyer at the same price, I will gladly return his money. If it�s at a lower price, I will gladly send him the difference.

Again, this was NEVER a traditional deposit; they just wanted to ensure that there was no longer any further solicitation. There were no contingencies. Nothing in writing that stated that in the event... To be honest, I never would have never taken the business off the market if I believed that their money was refundable just because they changed their mind. Of course now, they are claiming it was a deposit to bind a contract. There was never a contract to bind. I wanted one, but they did not (for whatever reason).

I'm disgusted at how these people operate and can't help but feel as though this was a strategic move on their part.

Can someone please tell me my options? Thank you.

They gave you 5000.00 to take the business off the market until they could complete the sale. You took it off the market. You don't owe them anything in my opinion.

 

[latigo]

NJ

I am selling my business and have had it on the market for several months. Had several different offers and apparently the business was in great demand. One of the parties gave me 5000 dollars in the beginning of October to take the business off the market as they wanted to make sure they were a lock for the purchase, which I did. I asked them to have a contract drawn up prior to me accepting any sort of monies (to protect everyone's interest). They did not want to delay and expressed the contract was just a formality and they were more interested in preventing other buyers from taking "their" business. In any event, they wanted the transfer of ownership to take place no later than Nov 1.

On Oct 15ish I started to urge them to put something in writing. They claimed that their lawyer was on top of matters. It comes to light that they never had their attorney do a thing. Not a thing! Nov 1 was during the hurricane so obviously that date was not going to happen for a closing. I called literally every day inquiring as to the status.

Yesterday, I received a voice mail from the buyer stating that if I didn't accept a 50,000 reduction (35% reduction), he was not going any further and wanted his money refunded. Ironic since he didn�t do anything anyway.

Is he entitled to receive his money back? There was never any language written or spoken that allowed for the return. In fact, I was the one pushing for legal representation from the beginning so that something like this would not occur. They claimed the money handed over was to prevent further solicitation of my business and to ensure them that the pre negotiated sale price would be honored. Once again, they didn't want ANYTHING in writing.

So now I'm stuck with no buyers, a business that is prepared to be sold, staff that now knows the business is being sold, customers knowing, etc. In fact, the buyer has been running around town telling everyone that he's the new owner. He also had words with one of my staff which led to that employee walking out the door and never to be seen again.

Right is right and I plan on putting the business back on the market. Should I find a buyer at the same price, I will gladly return his money. If it�s at a lower price, I will gladly send him the difference.

Again, this was NEVER a traditional deposit; they just wanted to ensure that there was no longer any further solicitation. There were no contingencies. Nothing in writing that stated that in the event... To be honest, I never would have never taken the business off the market if I believed that their money was refundable just because they changed their mind. Of course now, they are claiming it was a deposit to bind a contract. There was never a contract to bind. I wanted one, but they did not (for whatever reason).

I'm disgusted at how these people operate and can't help but feel as though this was a strategic move on their part.

Can someone please tell me my options? Thank you.

Yes, but you won’t like it because your only legal “option” is to return the $5K.

Your insistence on written documentation indicates that these discussions were preliminary to entering into a written agreement.

In other words, your state of mind was that in order for the deal to be binding, it needed be reduced to writing. Thus, there was no mutual meeting of the minds. Which is essential to the formation of a contract.

There was nothing to prevent you from returning the good faith deposit and continuing to solicit potential buyers.

The fact that the potential buyer procrastinated in having the agreement drawn and your persistence only serves to verify that the deal had not been solidified.

 

[tranquility]

Yes, but you won’t like it because your only legal “option” is to return the $5K.

Your insistence on written documentation indicates that these discussions were preliminary to entering into a written agreement.

In other words, your state of mind was that in order for the deal to be binding, it needed be reduced to writing. Thus, there was no mutual meeting of the minds. Which is essential to the formation of a contract.

There was nothing to prevent you from returning the good faith deposit and continuing to solicit potential buyers.

The fact that the potential buyer procrastinated in having the agreement drawn and your persistence only serves to verify that the deal had not been solidified.

There WAS a "meeting of the minds" regarding the option.

One of the parties gave me 5000 dollars in the beginning of October to take the business off the market as they wanted to make sure they were a lock for the purchase, which I did. I asked them to have a contract drawn up prior to me accepting any sort of monies (to protect everyone's interest). They did not want to delay and expressed the contract was just a formality and they were more interested in preventing other buyers from taking "their" business. In any event, they wanted the transfer of ownership to take place no later than Nov 1.

And, if there wasn't (Not authority, just how one court [Seventh Circuit in 931 F.2d 1220] phrased it.):

Promissory estoppel can be invoked in a contract setting as well as in a noncontract setting. If one party offers something to another party, without requiring consideration in return, the gratuitous promise might nevertheless prove enforceable if the promisee acts to her detriment in reasonable reliance on the promise. See, e.g., Restatement (Second) of Contracts Sec. 90 comment a, illustration 1 (1981); Bank of Marion, 57 Ill.2d at 124-25, 311 N.E.2d at 140. But promissory estoppel can also arise in the contract setting when consideration is present--for example when the alleged agreement does not exist in writing but one party has already acted in reliance on that agreement. Gold v. Dubish, 193 Ill.App.3d 339, 140 Ill.Dec. 9, 549 N.E.2d 660 (1989).

Now, in the later we would be looking for the OP's damages, and not the benefit of the bargain of $5K. I think I'd make the other party sue me for the difference if that's his claim.

 

[latigo]

There WAS a "meeting of the minds" regarding the option.

And, if there wasn't (Not authority, just how one court [Seventh Circuit in 931 F.2d 1220] phrased it.):


Now, in the later we would be looking for the OP's damages, and not the benefit of the bargain of $5K. I think I'd make the other party sue me for the difference if that's his claim.

Yes, there was a meeting of the minds; the mutual understanding that the offer and option would be reduced to writing.

But aren't you overlooking an essential ingredient to this scenario, like the New Jersey statute of frauds?

Or do you maintain that the granting of an option to purchase real estate is not “the creation of an interest in real estate” as defined
In Title 25 of the New Jersey Statutes and thus need not be in “writing” in order to become “binding”? Section NJS Section 25:1-5

Not only does the statute of frauds apply here to render the oral offer and option non-binding, but n.o.v. the statute, neither could the offeror obtain specific performance. It would be asking the court to fill in the essential blank spaces (payment terms, interest, closing and closing costs, date of possession, etc, etc.,) , which a court would not and cannot do.

Even a written purchase agreement is not enforceable if it requires the court to speculate as to such essential contractual ingredients. Judges are not in habit of drafting agreements between litigants.

And since the offeror cannot enforce a sale, then "mutuality of obligation" is totally lacking and the offeree cannot legally retain the deposit.

Adding:

Plus you can bet on it, that if the OP received a better and higher offer to purchase, his attorney would have told him to return the $5K and jump on it! And be justified in doing so.

 

[Mass_Shyster]

Or do you maintain that the granting of an option to purchase real estate is not “the creation of an interest in real estate” as defined
In Title 25 of the New Jersey Statutes and thus need not be in “writing” in order to become “binding”? Section NJS Section 25:1-5

This is for a business, not necessarily including real estate.

 

[tranquility]

This is for a business, not necessarily including real estate.

I agree with both latigo and Stevef's implication. If the Statue of Frauds were involved (in that the sale was for real estate or other covered item/promise) the OP could not reasonably rely on a verbal promise so promissory estoppel would be out AND we would not have a writing so the SOF would prevent enforcement of the purported contract.

 

[latigo]

This is for a business, not necessarily including real estate.

That certainly is a possibility and another is that the OP has no building to sell or lease or leasehold interest to assign because he operates his business out of the back of his pickup.

None of which would alter the fact that neither party looked upon the deal as packaged and sealed until a written contract was produced and mutually accepted. If not, they sure wasted a lot of time yacking over it.

Best regards, always.