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MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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We listed our business for sale 2 years ago. Our broker brought

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We listed our business for sale 2 years ago. Our broker brought 1 potential buyer in the first year. He is suing us for services rendered, even though the business has not sold. He's stating we're in breach of contract because I didn't submit the latest financials to him in a timely manner, although he has 3 years of financials in his possession. We're in NJ. Is the automatic extension clause (with regard to our contract with him automatically renewing if we don't terminate in writing 30 days before) legal in NJ? Can he sue us when he has not sold the business?
Thank you for the post, I am happy to assist you by answering your questions. While the automatic renewal is valid, as this is a business to business to contract, wherein the parties are presumed to be sophisticated parties, adept to negotiate the terms of such agreements. However,the broker cannot sue you if you have acted in good faith and not frustrated the intent/objective of the contract. To illustrate, if the broker requested FY 2011 financials within 10 days, but did not receive them for 30 days despite you making a good faith effort to receive the financials from your account, the broker would not have a basis to sue you. However, if you withheld the financials because you did not want to execute the sale, though were contractually obligated to execute a sale upon presenting a valid and reasonable offer, then you could be subject to suit. The question really boils down to the reason why he has not sold the business, if the reason he has not sold the business is that your act or omission prevents him from doing so, then he could sue you for the fees he would have incurred, assuming the contract allows for such suit. Please let me know if you need additional guidance or have any follow up questions.
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Customer: replied 4 years ago.

Although we had already provided him with 3 previous years financials, we did not provide updated financials for that current year within 20 days, his contracted deadline. But I had informed him that we were working with an IRS revenue officer to alleviate a lien, and that we needed time to work that out first before proceeding. That is the reason that we delayed in providing paperwork. We were very much consumed with the paperwork requirements the IRS was placing on us.


 


On a side note, in the first year of our contract with him, he only brought one prospective buyer. Is abandonment an avenue we can pursue, as he was not in contact with us for a number of months after the onset of our contract?

Yes, you could claim abandonment but to sustain that claim would have to show that you attempted to make contact with him and he repeatedly fail to reply. Also, if you communicated to him in writing that you were not in a position to sell prior to first resolving the lien, that could be a basis to defend his suit as well as your notice to him should have put him on notice not to proceed with efforts to sell the business until you notify him that the issue was resolved.