Can I cancel a business purchase for misrepresentation?
I entered into a contract to buy a business on the 23rd of June. The person represented (put it in the contract as well) that the company did not have loans, and that there were no more than 30k$ in money owed to various vendors etc. He also stated that he had the lease on the building until the 15th and took money for the rent until the 15th (he put this in the contract also).
The building owners came and said that he was behind on the rent, he had no right to sublease. I’ve found so far a 98k$ loan, outstanding health insurance bills, vendor bills, etc going up another 40k$ probably. He is holding the website and phone number hostage now. I’m locked out of the building.
Can I just walk away from this contract at this point from how misleading he was? I’ve paid, but I’m more concerned with the customers that are owed work.
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It seems you have two main options moving forward:
1. Withdraw from the Purchase Due to Misrepresentation
You can rescind the agreement if the seller made false or misleading statements that affected your decision to buy. This would involve backing out of the deal and seeking the return of any funds you’ve already paid. If the seller refuses, you may need to pursue legal action to recover your money, supported by documentation showing how the contract or representations were inaccurate.
2. Proceed with the Sale Despite the Discrepancies
Alternatively, you can move forward knowing the circumstances differ from what was promised. This may make sense if the deal still offers sufficient value, but it means accepting the risks associated with the misrepresentation. If you take this route, you should document the differences and, if possible, negotiate changes—such as a price adjustment or added protection—to account for the issues.
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I entered into a contract to buy a business on the 23rd of June. The person represented (put it in the contract as well) that the company did not have loans, and that there were no more than 30k$ in money owed to various vendors etc. He also stated that he had the lease on the building until the 15th and took money for the rent until the 15th (he put this in the contract also).
The building owners came and said that he was behind on the rent, he had no right to sublease. I’ve found so far a 98k$ loan, outstanding health insurance bills, vendor bills, etc going up another 40k$ probably. He is holding the website and phone number hostage now. I’m locked out of the building.
Can I just walk away from this contract at this point from how misleading he was? I’ve paid, but I’m more concerned with the customers that are owed work.
Lexi, Chatbot
I'm sorry to hear about the situation you're facing with the business purchase contract. have you consulted with a lawyer regarding this matter?
Not yet.
Lexi, Chatbot
Have you gathered all the documentation related to the contract and the misrepresentations made by the seller?
Yes.
Lexi, Chatbot
Is there anything else the lawyer should know before i connect you? rest assured they’ll be able to help with misrepresentation in the contract.
Yes.
Wendy
Hello. My name is Wendy and I am an attorney, though I may not be licensed in your jurisdiction. I can certainly provide information related to this contract issue.
Does the contract provide for any specific remedy or entitlement if either of you (here the seller) violates any provision of the contract?
It does not.
Wendy
Have you paid anything yet to this seller?
I did pay.
Wendy
Do you owe any more to complete the purchase?
There is money that he wants to be paid that has not been collected by customers yet for work completed. Roughly 40k$. In the contract he agreed that this 40k$ owed could be held against if there is more than 30k$ in payables that are owed by the company.
Wendy
It seems you have two main options moving forward:
1. Withdraw from the Purchase Due to Misrepresentation
You can rescind the agreement if the seller made false or misleading statements that affected your decision to buy. This would involve backing out of the deal and seeking the return of any funds you’ve already paid. If the seller refuses, you may need to pursue legal action to recover your money, supported by documentation showing how the contract or representations were inaccurate.
2. Proceed with the Sale Despite the Discrepancies
Alternatively, you can move forward knowing the circumstances differ from what was promised. This may make sense if the deal still offers sufficient value, but it means accepting the risks associated with the misrepresentation. If you take this route, you should document the differences and, if possible, negotiate changes—such as a price adjustment or added protection—to account for the issues.
Is it legally realistic to back out of the contract because of the misrepresentations? Like bad faith etc?
Wendy
Yes, it is reasonably possible to back out due to the numerous misrepresentations. The challenge will be if the other party claims you cannot back out and will not return what you have paid. If that turned out to be the case, you might find yourself in a lawsuit for a court to decide who is required to do what.
At this point I would rather cut my losses and not even seek what I paid.
I signed onto this as an LLC, are my personal assets liable for anything involved with this LLC?
Wendy
The misrepresentations could be just negligent, or if intentional could be fraud. Especially if the landlord is saying a new owner cannot just take over the location that—for many kinds of business—is a big difference in what is being purchased.
If you are willing to give up what you paid, then a reasonable approach would be as follows:
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Send written notice of your intent to cancel/terminate the contract due to the misrepresentations, including but not limited to (and list the key ones);
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That as a result of those misrepresentations, any amounts paid by you are to be returned to you.
Then if the seller returns those funds, great. If not, you can then decide to just walk away or to pursue them in a lawsuit.
If the seller attempted to sue you seeking to enforce the contract, you will want to keep all evidence of the misrepresentations.
There's no way it could be negligent in my opinion, but I understand.
Wendy
I agree that the types of misrepresentations you describe are almost certainly intentional (fraud). I do hope the information helps.
I'm going to take one moment to see if I have any other questions about this if you could be patient with me.
Wendy
Of course.
Would you recommend paper mail or an email to give notice on this?
Wendy
I have gotten to where I typically do both.
At 39 with roughly 147 credits an accounting focused degree, is it too late to try to go to school to be a lawyer? lol
(lawyer*)
Wendy
Not at all, but I suspect you may prefer the accounting. :)
Hah do you say that because of the lawyer work or because of how I’ve come across in our interaction?
Wendy
Because of the work—it is (as so much work can be) not always fun or interesting.
Ah I understand. I was an infantry paratrooper and had plenty of walks in the desert. This civilian work stuff is gravy. Thank you for the time.
Wendy
Understood and thank you for your service.
You’re welcome. Have a good day.
Wendy
You too.
Wendy
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