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I work for a public company in FL and we did a sponsorship

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deal with another public company...
I work for a public company in FL and we did a sponsorship deal with another public company last year where they pay us a large fee each year. A part of the deal is making the partner company the exclusive vendor in a certain product category for our company and our commitment to buy their products. We did not specify any "minimum" in the official contract that was signed and executed, but during the negotiation process my company provided (in writing) what the historical purchases have been. It turned out that these numbers were overstated significantly and our company knew about the mistake before the contract was signed but did not tell the potential partner company. Now, a year later, the partner company is only realizing about half the B2B sales they expected and they are very upset. Did my company commit fraud? Can the partner company sue us if they find out we knew the estimated sales were overstated and we did not tell them the truth before contract was signed?
Submitted: 9 years ago.Category: Business Law
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1/4/2009
Business Lawyer: socrateaser, Attorney replied 9 years ago
socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39,498
Experience: Retired
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Based on the posted facts, your company made false representation of a material fact concerning the historical purchases, intended to induce justifiable detrimental reliance from the partner company, and the partner company was damaged as a consequence.

 

And, that is the common law definition of civil fraud.

 

Your acts don't disclose the extent of the damages caused, and it would be somewhat dependent upon the respective benefits and burdens of the two companies to the deal. Nevertheless, the partner company could demand reliance damages, which would be what the partner would have received had your company's assertions been true. And, that amount could be substantial.

 

Also, for a proved fraud, punitive damages are available, so that could add to the return. And, since this is contract fraud, the partner company could get attorney's fees, assuming that they are called for in the contract.

 

So, this could end up being a rather expensive litigation.

 

 

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