My husband, my son and I worked for a guy who owned his own industrial cleaning business. In Feb. of this year this guy decided to fold his company and take full time employment. He approached us and asked if we would like to buy his company. Since my husband and I would have no income coming in, we said yes. With this, the guy told us that since he still had contractual jobs that had to be finished up, we could use his trucks and assets so that we could complete those jobs. He went to the cellular company with us and had them switch the cell phone account (his main number) over to us. He also conferenced a call to the Business Insurance approving us to get Business Insurance in our name. During this time, the negotiations were taking so long that we had registered as a new business using part of his business name but changing it to an LLC. For many reasons, mainly his liabiities and liens, that negotiations fell through. We dicided not to buy his businees or assets. He says now that we owe him for rental on his equipment for the last 5-6 months, (we turned everything back in to him in June), he wants us to pay his Business insurance for that time, he says we stole his main business line and wants us to return that and he says we owe him at least $1000.00 a month for his use of his name. Help. We are barely maing ends meet and we can't afford a lawyer.
Country relating to Question: United States
State (if USA): Indiana
just talking to many different people in the business world.
Thank you for your question.Just to be clear, your negotiations fell through but you ended up opening a different business in the same industry? And the clients of the other business followed you, or you told them of this new business entity? Is the other entiry (the one you started with the 'LLC' name) still valid?
Yes, we ended up opening a different business in the same industry. Clients followed us because since this is a labor business that is dependent on the quality of work that you can provide, they all knew my husband and his work quality and so we were able to get contracts with these same clients. Before the guy folded up his business though, he went to some of the clients and advised them that we would be taking over the business. He also had no issue then that we used part of his original business name. Our business is still valid. We have registered it with the state and everything.
Thank you for your follow-up.That makes it tough, and it frankly makes his argument more legitimate since your name for the new business was so substantially similar to his, that it can be seen that you were trying to profit from his name and reputation. Under that 'substantial similarity' argument he would be able to file against you for damages, as well as potentially Breach of Contract, and seek redress. I am sorry but while the answer may not be as you had hoped, based on the facts you provided it does appear that you would be better served that you pay for utilizng of his equipment and the insurance, since it can be shown to have covered his clients and potentially your business (because the trademarked names are XXXXX XXXXX). I do not see any viability with his argument that you owe him something for the clients, as there was no agreement signed that you could not solicit them for yourselves. Until you change your name to something else, he can demand payment for that asset, because under law it would be deemed 'good will' that you are using for yourselves. If you used a substantially different name from his, my answer would be different, but based on this situation, he's got grounds.Good luck.
Kindly remember to only rate my answer when you are fully satisfied. If you feel the need to rate my service as either "Bad" or "Poor”, please stop and reply to me via the CONTINUE CONVERSATION button with whatever issue or clarification you may need. I will be happy to continue further and assist you until I was able to explain your concern to your satisfaction.
Please be aware that if you give any rating below 3 stars then I will not be compensated in any way for helping you today. Good luck to you!
I don't understand where a breach of contract comes into play. We could not sign an agreement to buy the business or assets because of the liens and liabilities, including tax liens. Also, are we obligated to return the telephone number back to him as he is demanding?
Thank you for your follow-up.The breach of contract takes place, or at least the argument, is that you 'substantially' entered into the agreement, such as you took over the business, the name, and the phone number, and then concluded negotiations BUT continued to work. That, in essence, is a breach because you did not completely end your involvement. Since the phone number was the company's, and you took it over temporarily, you would either have to buy the rights to the phone number form him, or return it back because it was transferred to you on the contingency that you would purchase the business. That did not happen, so you have to return the property you received. Consider it akin to an engagement ring situation--if the engagement fails because the bride cancels the wedding, she is generally required to return the engagement ring back to the other party.Good luck.Dimitry Esquire41123.9813644329
JA Mentor, Licensed in PA & NJ, specialize in business/contract disputes, estate creation & admin
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).