Business Contracts Violation of unsigned contract

[dwitz]

A former client and I formed a partnership for a new business. I have a lot of communication from the partner confirming the terms (49 to 51% share with him putting up the start-up capital in exchange for my consulting) and a draft of the initial contract he sent. Over the next 3+ months while we did the work he pushed off signing the contract, sent a lot of revisions which were uploaded to a 3rd party system that he blocked access to (I get it lesson learned). At the end my team and I put in about 250 hours of work to get the business ready (paid for the office, put a bunch of expenses on our card, trained the sales team, build marketing collateral, developed content, recruited contractors, etc) under the assumption that we would keep 49% of the business. He ended up backing out of the deal claiming that my plans didn't align with his and making up a ridiculous story about how my plans favored the expansion of my other company. The other issue is that the partner is in Texas, he registered the business in Texas, BUT the office used for operation is in NYC and NYC was the only city we were pursuing for the venture at this time so the name was registered there as well. Can I make sure the case stays in NYC?

The amount of money in question is only about 12-15k, so going to court or hiring a lawyer in this state is not really feasible, so I would like to represent myself. What can I sue for (note the business has not produced income to this point, I want to sue for my time and/or equity I was supposed to be granted)?

 

[army judge]

A former client and I formed a partnership for a new business. I have a lot of communication from the partner confirming the terms (49 to 51% share with him putting up the start-up capital in exchange for my consulting) and a draft of the initial contract he sent. Over the next 3+ months while we did the work he pushed off signing the contract, sent a lot of revisions which were uploaded to a 3rd party system that he blocked access to (I get it lesson learned). At the end my team and I put in about 250 hours of work to get the business ready (paid for the office, put a bunch of expenses on our card, trained the sales team, build marketing collateral, developed content, recruited contractors, etc) under the assumption that we would keep 49% of the business. He ended up backing out of the deal claiming that my plans didn't align with his and making up a ridiculous story about how my plans favored the expansion of my other company. The other issue is that the partner is in Texas, he registered the business in Texas, BUT the office used for operation is in NYC and NYC was the only city we were pursuing for the venture at this time so the name was registered there as well. Can I make sure the case stays in NYC?

The amount of money in question is only about 12-15k, so going to court or hiring a lawyer in this state is not really feasible, so I would like to represent myself. What can I sue for (note the business has not produced income to this point, I want to sue for my time and/or equity I was supposed to be granted)?

Sue for whom for what?
Apparently there was a discussion of a contract, but the contract was never signed by both parties.
Therefore, there was never the minimum "meeting of the minds", plus a few other elements appear to be missing in order to prove there was a valid contract.

Before you file a lawsuit claiming a breach of contract, the first question any judge must determine is whether a contract existed between the parties?
You, as a plaintiff must prove four elements to prove that a contract existed between you and the other party:

1. Offer - One of the parties made a promise to do or refrain from doing some specified action in the future.

2. Consideration - Something of value was promised in exchange for the specified action or nonaction. This can take the form of a significant expenditure of money or effort, a promise to perform some service, an agreement not to do something, or reliance on the promise. Consideration is the value that induces the parties to enter into the contract.

Consideration distinguishes a contract from a gift. A gift is a voluntary and gratuitous transfer of property from one person to another, without something of value promised in return. Failure to follow through on a promise to make a gift is not enforceable as a breach of contract because there is no consideration for the promise.

3. Acceptance - The offer was accepted unambiguously. Acceptance may be expressed through words, deeds or performance as called for in the contract. Generally, the acceptance must mirror the terms of the offer. If not, the acceptance is viewed as a rejection and counteroffer.

4. Mutuality - The contracting parties had "a meeting of the minds" regarding the agreement. The parties understood and agreed to the basic substance and terms of their contract.

If the plaintiff proves up all of these elements, she or he meets its burden of making a prima facie case that a contract existed.

The defendant, in order to properly mount a defense to the existence of the contract, must prove evidence undermining one or more elements cited hereinabove.

Based upon your account of events, you simply began work, and accomplished same before a contract or even a SOW 9statement of work) had been created and agreed to by both parties.

The mere discussion of what could be agreed upon or pursued without benefit of a signed contract BEFORE proceeding to do the work, never ends well for the one expending the effort called work.

It appears that you simply gifted this grifter your work.

You can try to sue him in Texas or New York. Small claims limits here (in Texas) can't exceed $10,000. Small claims in NY are limited to $5,000, or $3,000 in some town courts.

http://www.nolo.com/legal-encyclopedia/small-claims-suits-how-much-30031.html

I suggest you simply chalk this up to a lesson learned. Even if you secure a judgment in Texas, its extremely difficult, bordering on the impossible to collect any judgment in Texas. Our constitution protects and tend to favor debtors for reasons dating back to the early 1870s and Reconstruction after the Civil War.

As I said, you have no damages for which the law of contracts could grant you relief, as there was no contract, and yet your seemingly proceeded only on a promise.
I also don't see any relief based in equity, because your intent was to operate contractually.
All i can say is don't proceed or act on promises, only on a properly executed contract, where you know the other party is solvent.
One other bit of advice, operate (even when there is a contract), on periodic performance payments based on contractual milestones.
That helps both parties avoid being bamboozled and flim flammed.

 

[dwitz]

Thank you for the thorough response.

While there was no signature, there was written statements made from the other party offering 49/51% share, me agreeing, and him giving the go ahead. This was done via skype communication. This conversation was followed by the other party sending me a draft of the contract. This was further proceeded by a statement from the other party during a conversation stating "I own 2% more of the company than you do". Further statements saying my responsibilities in exchange for equity. There's quite a bit of this back and forth that I have records of and I would say enough to demonstrate the 4 points you referenced. Why do I need to keep it to small claims? Can't I sue in regular court and represent myself? From what I understand you can't sue an out of state party in small claims and going to Texas is not something i'm interested in.

 

[army judge]

Thank you for the thorough response.

While there was no signature, there was written statements made from the other party offering 49/51% share, me agreeing, and him giving the go ahead. This was done via skype communication. This conversation was followed by the other party sending me a draft of the contract. This was further proceeded by a statement from the other party during a conversation stating "I own 2% more of the company than you do". Further statements saying my responsibilities in exchange for equity. There's quite a bit of this back and forth that I have records of and I would say enough to demonstrate the 4 points you referenced. Why do I need to keep it to small claims? Can't I sue in regular court and represent myself? From what I understand you can't sue an out of state party in small claims and going to Texas is not something i'm interested in.

You don't have to sue to in small claims.
You can sue in any court and do do pro se.
You, as do we all, have the right to be our own lawyer.
You can sue him in NY, if that is your desire.
In some cases, the mere filing and service of a lawsuit will stimulate some defendants to enter into settlement discussions.

I will refrain from offering a legal opinion.
I suggest you do whatever you think makes sense for you.
Should you not prevail, you're no worse off had you not filed a lawsuit.
At least you know what you must prove, should decide you proceed with a lawsuit.