Consumer Law, Warranties verbal agreement, am I entitled to compensation?

[takenagain]

I live in TN. I have spoken in depth with a Paralegal from VA. She admits not knowing much about TN law, but has encouraged me to take legal action stating I have a strong case.

I was approached with an offer to loan me money to start a business. I discussed this offer with the party involved and an agreement was made. This person agreed to pay for all of my initial inventory cost and to provide a facility to operate the business. My obligations and what I agreed to was to pay a 15% return on her investment and to hire an employee which is a friend of hers. She agreed that I would be the business owner and have the majority of decision making regarding the business while the loan was being repaid. She did want to have some say in the type of inventory and products that were purchased, I agreed. Once all of this was discussed in full and all parties involved agreed, I gave a notice to my employer and quit my 4 days later. In the meantime made arrangements to purchase over $5000 of merchandise. She went with me to purchase the merchandise, we agreed on the purchase and she paid for it with a personal check. The invoice was in my name. She insisted that it be that way because she was only loaning me the money and I was the business owner. This is a long story, but to make a long story short, she decided to cancel our agreement, to open the business in her name and hire me as an employee. My duties and obligations would be the same, but I would not have to repay the loan. I did not agree and told her I would honor my original agreement and nothing else. I have no written contract, but I do have notes that I made. I have the invoice with my name on it that supports my version of the agreement. I have the check number she used to pay. I have documents that show I opened a checking account for my new business and that I added her employee as a signer. I can show that the account was closed and that another account in her name was used. I have other documents too that show credibility to my version of the agreement. I am thinking about letting this go and counting my blessings, but I am out of my job, I worked many long hours preparing for this new business and now I have absolutely nothing to show for it. What should I do, do I really have good case against her and what would my damages be? I can contact an attorney in my area if feel this is even worth pursuing, but I didn't want to bother him if it is not. Thanks so much to whoever replies.

 

[Michael Wechsler]

From what you wrote -- and this is only from the little we have to work with here -- it would seem that you have a case. It would have been much stronger if the agreement had been in writing. People out there, listen to me and heed my warning when I say put even the mildest business agreements IN WRITING! Write a memorandum and fax it to the other person if necessary and have them confirm!

I hope you have correspondences. Regardless of contract law, you may well be able to recover from this person on the theory of detrimental reliance. You quit your job and performed work by obtaining the seller and arrange for the purchase of inventory and refrained from getting another backer on her promise that she would put up the money. The key here is that she knew that you would rely upon her promise and that if she didn't keep it, you would be up the proverbial creek since her actions would cause you to be put in a bad position. It is possible that you may also be able to sue her for fraud -- she was supposed to loan you the money and then turned around and tried to steal the business after learning of the plans and having you go through the above motions which would place you in an impossible position to compete as well as obtain the merchandise you were purchasing, in your name, with money that she was loaning you.

If the invoice was in your name, then technically you are the owner of the merchandise even though she paid for it. Question -- who has the merchandise? If you do... then you have leverage.

I'd keep the merchandise, run my business, and tell her to sue you for it if she decides that she is not honoring your agreement. If she has the merchandise, I'd send her a letter stating that you will sue her for the merchandise and, if she does not return it, you will report her conduct to the DA as theft -- the agreement is in your name and she diverted the merchandise to her location. Getting the DA to do some of the work may also reduce your costs in dealing with an attorney and prompt her to settle with you.

If you do obtain a settlement, you may want to obtain a non-compete agreement from her as part of the settlement.

As I said... I don't know all the facts but that's my first read of what you wrote.

 

[takenagain]

You hit the nail right on the head. I have been doing some research on the net and detrimental reliance does fit the bill. I beleive from the very begining she wanted to locate the source for the inventory which is a closely guarded secret in my circles. She wanted me to train her to operate the business and then let me go. She inticed me into leaving my job by offering me a chance to own my business and never once really planned on honoring our agreement. Once I was without a job she thought I would be dependant on what ever offer she gave me.

She has the merchandise at her home. Her basement was going to be the facility for my operation until I was financially able to operate the business and pay the overhead. She owns several commercial properties and offered to rent to me when I no longer needed her loans. She maintained from the very beginning that she did not want another business and that a 15% return was better than what a CD would return. I don't want any more dealings with this woman and I am not interested in being in business with her or being her employee. I would honor my agreement and repay the loan with a %15 percent return, but beyond that I want nothing else to do with her. She is not trustworthy.

I do not think it will be difficult to prove we had an agreement. Many people were aware of it. What may show to be a bit of a problem are the exact terms of that agreement, but I have documents that lend to my credibility. Why would a simple employee have those documents? I was supposed to be the owner. Thanks for all of your help and advice. I will pursue this and I will cosider all of your advice.

 

[Michael Wechsler]

You're welcome and good luck. As I said, it seems that you may have legal title to the merchandise. If that is the case... use it!