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Barrister
Barrister, Attorney
Category: Legal
Satisfied Customers: 22401
Experience:  14 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 24+ yrs
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If I write a contract on the back of a check, and print "Seller"

Resolved Question:

If I write a contract on the back of a check, and print "Seller" where the Endorsement section it, is that legally binding? I want it to be binding for all business entities (C corp, LLC, S corp etc.). Here is the language that would be printed above where the seller signs:
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This purchase agreement is entered into between [Seller full name and address], (the “Seller”), and [Buyer full name and address], (the “Buyer”). Seller desires to sell and Buyer desires to purchase all rights and interests in [Name of business entity, type of entity, and state entity number] (the “Entity”).

In consideration of the mutual promises, representations, and covenants, the parties hereby agree as follows:
Consideration, Purchase, and Sale - Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer, all rights and interests in the Entity. In consideration thereof, Buyer agrees to pay Seller $125.00 (One Hundred Twenty Five and 00/100 dollars).
Closing - The closing and execution of the transactions contemplated by this agreement will be effectuated by endorsement and deposit of this check.
Indemnification – Seller will not be responsible for any further liabilities that may arise after the sale.
Representations and Warranties - Seller represents and warrants to Buyer that Seller has full power and authority to execute and deliver this Agreement and that this Agreement constitutes the valid and legally binding obligation of seller. Seller’s ownership of the entity and/or its membership interests include but are not limited to all assets and interests in assets (tangible assets, intangible assets, unclaimed property/assets, prepaid liabilities, or other entity rights).
Submitted: 11 months ago.
Category: Legal
Expert:  Barrister replied 11 months ago.
Hello and thank you for using JA! My goal is to provide you with excellent service and help with your legal problem.
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If I write a contract on the back of a check, and print "Seller" where the Endorsement section it, is that legally binding?
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When two parties enter into a contractual relationship, there is no specific restriction on what type of written document the contract can be drafted on. Although you woud either have to have a large check or very small writing to get that on a check, I would opine that it would be enforceable as long as there was an intent for both parties to enter into a contract.
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You couldn't print the wording so small as to be unreadable as that likely wouldn't be upheld if challenged in court because it would appear done with an intent to make the contract difficult to read or understand and not in good faith.
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But if both parties understood and agreed to the terms, there is no reason why the terms couldn't be printed on the back of a check.
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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.

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Customer: replied 11 months ago.

Ok, but is the language legally binding and applicable for all business entities (LLC, C Corp, S Corp etc.), does the language properly transfer everything? I believe you buy a member's interests in an LLC but you buy the entire C corp in a corporation, is the language applicable to all entities? Also, what if the seller didn't have the proper rights to sell the business, is that my fault? For example, they sell me the business, I sell it for $1,000, then we find out they never owned it and the real owner makes a claim against me, would we have recourse against the false seller or would that be on me.

Expert:  Barrister replied 11 months ago.
Ok, but is the language legally binding and applicable for all business entities (LLC, C Corp, S Corp etc.), does the language properly transfer everything?
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It depends on what assets the seller has, but probably not. For example if there is stock, then the seller would have to sign over the stock certificates. If they had vehicles, those have titles that need to be signed over. Real estate has deeds.
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I believe you buy a member's interests in an LLC but you buy the entire C corp in a corporation, is the language applicable to all entities?
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If the seller signed it and there was a "meeting of the minds" with the intent to sell, then it would be binding as long as the seller legally owned whatever they were selling. If they sold a vehicle, then that agreement would hold up in court to be able to force them to transfer title to the buyer.
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Also, what if the seller didn't have the proper rights to sell the business, is that my fault?
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That would be misrepresentation, but you would have to take it up with the seller. If you bought something and then turned around and sold it, but the first seller never owned it, then the person you sold it to could come back on you because you didn't legally own whatever it was. Your recourse would be to go after the first seller and sue them for your money back.
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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.

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Customer: replied 11 months ago.

Ok but what about assets that you don't need a title/deed/stock certificate to be signed over, all you need is the business entity, and they've now signed over the business entity? In other words, what if all you needed control of was the business entity to get the assets. I'm specifically referring to unclaimed money that belongs to a business entity. If the money belongs to the entity, and I now own the entity, wouldn't I have a legal claim to it? If I now own the business, and the contract they signed and intended to transfer had the language to transfer "Seller’s ownership of the entity and/or its membership interests include but are not limited to all assets and interests in assets ...unclaimed property/assets...)"


 


If the owner signs over the business and all existing assets, doesn't that give me legal claim to the assets?

Expert:  Barrister replied 11 months ago.
If the money belongs to the entity, and I now own the entity, wouldn't I have a legal claim to it?
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Yes, for purposes like that, this type of contract would be sufficient. But if it were me, I would just have a one page contract that stated the same thing and just explain that if they signed the contract, they got the check. There is nothing legally wrong with your way, it is just a little odd...
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Thanks
Barrister
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Customer: replied 11 months ago.

So is the language "agrees to sell to Buyer, all rights and interests in the Entity" applicable to buying all types of business entities (LLCs, C Corps, non-profits etc.)? Will I legally have "title" or ownership or whatever of all the business entities with that language, or what does it need to be modified to? Keep in mind the "Entity" will be defined.

Expert:  Barrister replied 11 months ago.
As long as the language specifies what company is being sold, then yes, it would be sufficient to convey ownership as long as the person signing was the sole owner or had authority to sell the business. The problem would come into play if you had someone with a C-corp with a Board and stockholders and you get the Secretary or President to sign. If they don't have the authority to sell the company under their Bylaws or Articles of Incorporation, then you aren't legally buying the company. But for sole proprietorships, or Sub S or C corps where there is only one owner and he is signing, this would be fine if it stated, "agrees to sell to Buyer, all rights and interests in ABC Company, Inc"
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It would be difficult to determine whether the person signing the agreement had legal authority to sell the company without looking it up on the Sec. of State's website and seeing who the officers and board members are and then reviewing the Bylaws and Articles to see if that person had the power to sell.
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I can foresee a situation where someone says "I am the President of XYZ Co. and I agre to sell". They sign, you pay, they disappear and you later find out that they had no legal authority to sell because it takes a vote of the Board to agree to sell the company.
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Selling a corporation isn't really just as simple as signing a short form agreement as you have no way of knowing without researching if they person can sell.
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Thanks
Barrister
Customer: replied 11 months ago.
Assuming the person had/has the authority to sell it (which they've rep'd), and they have the power per the by laws or articles etc, would all different types of business entities legally transfer to me per our language? Do the rules or your answers change to these questions if the entity is dissolved or revoked? In other words, they sell me dissolved entity and now I own it and can reinstate it, operate it, claim assets under it, etc.?

It sounds like you're saying the language regarding "all rights and interests and all assets" is good enough, i don't necessarily need to disclose what assets the business currently has the rights/interests to, correct? Example: I buy a business with a bank account tied to it (assume the bank is ok giving me the money, and I can get to the money without the contract), legally, I don't have an obligation to disclose these assets to seller?
i.e I don't have to disclose to the seller there's an oil well under a piece of land when I buy it

I appreciate the time you've taken on this, and will definitely be leaving an excellent review. One last point of clarification: they misrepresent and sign the contract, I claim money under the assumption they were the original rightful owner, then the real original owner makes a claim against me. Do you foresee a probable scenario they have a valid claim above/beyond the amount I've claimed? I know there are thousands of possible permutations, but probability wise, they could most likely only come after me up to the value of said claimed assets, yes? I'm sure they could claim mental duress etc. but just probability wise.

Also, I may want to hire you for further advice, can you send me your contact info, or is it possible to re-hire you specifically through this site?
Expert:  Barrister replied 11 months ago.
Assuming the person had/has the authority to sell it (which they've rep'd), and they have the power per the by laws or articles etc, would all different types of business entities legally transfer to me per our language?
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If the person had the legal authority to sell, then yes, I would opine that the contract could be enforced to get them to transfer things like stock to you. A corporation is owned by whoever owns the stock. So if there is a sole owner who owns 100% of the stock, he can agree to sell you the company and you could sue to force him to transfer the stock to you if he refused. But if there are two owners who each own 50%, then you don't own the conpany if you only buy out one owner.
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Another issue...if you are looking at doing this so you can go to the state unclaimed property division and claim whatever accounts have been turned over to the state, the state officials aren't going to look at your contract on the back of a cashed check and turn over the account proceeds of a corporation. I used to work for the state and they aren't very bright and don't like people who are. They are going to require something formal]
from the Sec. of State showing a valid transfer of ownership.
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Do the rules or your answers change to these questions if the entity is dissolved or revoked? In other words, they sell me dissolved entity and now I own it and can reinstate it, operate it, claim assets under it, etc.?
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Yes, it gets a little more complicated. If the company has been dissolved adminstratively, then you would have to prove ownership to the SOS, pay any delinquent fees or taxes due, pay any reinstatement fees, and then you could claim the assets.
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Here is another potential concern...if the defunct company owed a bunch of back taxes for payroll or withholding, and you buy the entire company, then you could be considered to have bought those debts as well and be liable to pay them....
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I am not trying to poke holes in your idea, but these are things you should think about.
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It sounds like you're saying the language regarding "all rights and interests and all assets" is good enough, i don't necessarily need to disclose what assets the business currently has the rights/interests to, correct?
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Correct. Presumably, the seller of the business entity would know what its assets were when they agreed to sell. You don't have to spell them out if you are buying everything.
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Do you foresee a probable scenario they have a valid claim above/beyond the amount I've claimed?
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No, I think you are correct in that their claim would be limited to forcing you to disgorge any money that you were able to claim. I don't see anything like mental anguish or emotional distress coming into play here because you aren't doing anything to intentionally harm someoene.
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Also, I may want to hire you for further advice, can you send me your contact info, or is it possible to re-hire you specifically through this site?
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Although I am flattered, my agreement with JA prohibits me from representing customers I communicate with on the site. I kind of like working on JA's site so I don't want to do anything to get booted off.
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Thanks
Barrister
Barrister, Attorney
Category: Legal
Satisfied Customers: 22401
Experience: 14 yrs practice, Civil, Criminal, Domestic, Realtor, Landlord 24+ yrs
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