Payment Difficulties Following Business Purchase

[GSecure]

I recently purchased a company I had worked for after the previous owner had gotten into non-business related PR problems that was beginning to hurt the business. Because of the time frame, we agreed to terms of the sale that we should not have agreed to but felt forced to do so because our clients were dropping like flies. At the time the payments seemed feasible, but after a year of operation, we are struggling to pay the finance payments to the previous owner. On top of that, the previous owner still owns the building we operate out of, and we are currently being charged about 3 times market value for our office space, another term we begrudgingly accepted in order to push the sale through before we lost all of our clients.

We're now two months behind on payments (all vendor accounts are current). Everybody we talk to say the terms of the sale are ridiculous and looking back, we never should have accepted the proposal. We've attempted to talk to the previous owner about lowering payments but he has not been willing to listen.

Do we have any hope of legal action for a restructuring of the deal with the terms being so outrageous?

Thanks in advance.

 

[sandyclaus]

I recently purchased a company I had worked for after the previous owner had gotten into non-business related PR problems that was beginning to hurt the business. Because of the time frame, we agreed to terms of the sale that we should not have agreed to but felt forced to do so because our clients were dropping like flies. At the time the payments seemed feasible, but after a year of operation, we are struggling to pay the finance payments to the previous owner. On top of that, the previous owner still owns the building we operate out of, and we are currently being charged about 3 times market value for our office space, another term we begrudgingly accepted in order to push the sale through before we lost all of our clients.

We're now two months behind on payments (all vendor accounts are current). Everybody we talk to say the terms of the sale are ridiculous and looking back, we never should have accepted the proposal. We've attempted to talk to the previous owner about lowering payments but he has not been willing to listen.

Do we have any hope of legal action for a restructuring of the deal with the terms being so outrageous?

Thanks in advance.

Probably not.

You were desperate to close the deal and agreed to what you knew to be outrageous terms. Why would you think you could force the previous owner to renegotiate a contract you already agreed to?

If the terms were so ridiculous, you should have had better business sense to review them and consider their impact BEFORE agreeing to them. At this point, I'd say you were pretty much stuck.

 

[GSecure]

It was a case of either let negotiations go even longer and lose most of my customers, and my livelihood (non-compete cause in my contract), or accept the terms and hope to build the business back up after losing a handful of clients with the lengthy negotiation process.

We're on the upswing, but the payments just aren't feasible.

 

[tranquility]

Your desire to make money is not going to give you a valid duress argument regarding the contract. No court is going to review as to if you made a good deal or not. Impossibility is a way to void a contract when the drilling operation hits unforeseen rock outcroppings that extend to make the contract impossible or impracticable to perform. Here, you want the contract. You just don't want the terms.

 

[GSecure]

Not even in a situation where my career was at stake, given my non-compete, and my livelihood in an industry I've been in an executive role for over 30 years?

I had three options:

1.) Walk away from negotiations and lose my job when the company continued to lose customers at a rapid pace.
2.) Continue to negotiate, while losing customers until there's so few left that there's no company worth purchasing.
3.) Purchase the company and try to save it, and my ability to make a living doing the only job I've been doing for over 30 years.

Thanks everyone for the help. Though it's not what I wanted to hear, I'm continuing to research my options.

Just looking for a light in what appears to be a very grim situation.

 

[Antigone*]

Not even in a situation where my career was at stake, given my non-compete, and my livelihood in an industry I've been in an executive role for over 30 years?

I had three options:

1.) Walk away from negotiations and lose my job when the company continued to lose customers at a rapid pace.
2.) Continue to negotiate, while losing customers until there's so few left that there's no company worth purchasing.
3.) Purchase the company and try to save it, and my ability to make a living doing the only job I've been doing for over 30 years.

Thanks everyone for the help. Though it's not what I wanted to hear, I'm continuing to research my options.

Just looking for a light in what appears to be a very grim situation.

This is what you call making a bad investment. You might want to cut your losses.

 

[tranquility]

http://www.lexisnexis.com/lawschool/study/outlines/html/contracts/contracts11.htm

[2] Duress

If assent to a contract was obtained by coercion constituting duress, the contract may be avoided by the person subjected to the duress. An improper threat of harm that induces the other party to assent to contract terms constitutes duress. "Improper threat" is established where:

the threatened act would harm the recipient and would not significantly benefit the party making the threat;
the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat; or
what is threatened is otherwise a use of power for illegitimate ends. [Restatement § 176(2)]

Examples of duress include threats to:

commit a criminal or tortuous act against the party, his family or his property
extort money
commence a civil action under circumstances which could be deemed abuse of process
refuse to do business with the party
blackmail the party
refuse to perform a contract in order to extract an economically unjustified modification
terminate an employment contract unless the party or someone close to him consents to an agreement not connected with the employment contract.

The threat must be of sufficient gravity to make the contract voidable, determined based on an examination of the victim's experience, sophistication, age, and other relevant personal characteristics. The highest standard is applied in cases constituting "economic duress", such as refusals to do business with the victim.

This would not apply to your situation. But, even if it did, the usual remedy is rescission. That is, the contact goes away. That is not the resolution you want. You want a forced renegotiation.