Corporate Law What are my options?

[boy_wonder]

I was a partner in a cut flower business. I owned 50 percent of the company and my partner owed the other 50 percent. We later incorporated the business (c-Corp), I owning 50 percent of all stock and my partner owning the other 50 percent of the stock. We both were officers of the company.

We decided to sell the company and found a buyer. He also was in the flower growing business. The buyer agreed to purchase 100 percent of the stock in the company. This included all hard assets, all liabilities, the "name" of the company which allowed him to due transactions under such and agreed to purchase flowers from our inventory for the next three months (Oct. 1 through Dec. 31, 2001). The use of the "name" allowed the buyer to sell his flowers at approximately 20 farmers markets per week where we had built our business.

In exchange for 100 percent of stock in the company, buyer agreed to two separate deals with my partner and myself. I would receive $7000.00 up front, 50 percent cash value for all assets and 50 percent cash value of all flowers sold from inventory for the next three months paid every 2 weeks.
My partner would receive 50 percent cash value of all assets, 50 percent cash value of all flowers sold from inventory for the next three months paid every 2 weeks, and 2% of the net gross from the farmers markets and a job with Buyers Company.

Here is the problem. I have received the $7000.00 from buyer but no other monies to this date. Everyone involved based the deal upon a written proposal that stated everything above and verbally agreed upon. Buyer wishes only to pay my "partner" and then my partner is to pay me. Suffice to say I have hard feelings towards my business partner and the buyer. Ex-partner and buyer will not take my calls. I do not know if ex-partner has received any monies from buyer.

Can I file breach of contract against the buyer? What about my partner? Can I go after him also? Do I still own half of the company since I haven't received full compensation? Am I still intitled to monies made under my company's name? What legal recourse do I have?

 

[Michael Wechsler]

Obviously I don't have all the paperwork and facts, just a small review but I'll tell you my impressions. First and foremost, you should never, ever, ever do a deal for sale of a company verbally. Hopefully you sent over a memo, e.g. via fax, which states all the essential terms of the deal. At least there is some writing.

The buyer made a deal with you for your shares of stock. This has nothing to do with your partner. If the buyer decided to change the deal it can only modified with your consent. Without it, the buyer has breached the contract.

It seems that you may be able to sue the buyer (personally and also his company perhaps) for breach and your partner for your share for your share of the money if he has it since he is unjustly enriched.

You might sue for fraud and claim 50% of the net profits less the $7000. You'd have your 50% back and the net profits. You may also want to sue for other damages as a result of the breach such as consequential damages and punitive damages.

Alternatively, you might decide that you want the sale to go through and sue for the unpaid amounts plus court costs and punitive damages. This does not appear to be a good faith dispute.

Most importantly... did you sign away the rights to the shares of stock? Until you do the shares are legally yours (which doesn't mean that you have a right to keep them just that you are the current legal owner of the shares).