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i sold a business on contract. the buyer is in default of the

contract. what are my options...
i sold a business on contract. the buyer is in default of the contract. what are my options
Ask Your Own Business Law Question
Answered in 1 minute by:
2/4/2013
Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24,870
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations
Verified

Law Pro :

Hi. Thank you for using JustAnswer. My name is XXXXX XXXXX I'm going to assist you today.

Law Pro :

What does your contract state the options are if the buyer defaults - anything?

Customer:

hello

Customer:

if he is in default he has to come up with the balance in full or forfit the business back to me

Law Pro :

The word "forfit" or "forfeiture" is not liked in law.

Law Pro :

How long has the buyer been purchasing your business?

Customer:

he paid ten thousand down and has been making 4oo dolaar payments for about 2 years. hes has been 1 to 2 months behind for several months

Customer:

he still has a couple of years to go

Law Pro :

How hard would it be for your to "take over the business"?

Law Pro :

Does the contract provide for how you are to proceed if there is a default?

Customer:

excludung having to take him to court,,,not hard at all

Customer:

here is the actual paragraph from the agreement.......should the buyer otherwise default in any manner , including monthly payments of this agreement, upon ten day written notice to the buyer to cure such default, and buyer failure to cure such default within ten days, seller may terminate this agreement and buyer shall be required to return all assets purchased under this agreement to buyer, and all sums paid by buyer to seller prior to the default shall be forfeited by buyer. buyerwill also be liable for all costs including attorneys fees incured by seller in enforcing this agrreement

Customer:

there is also the issue of him moving the business. the state bought the building to tear it down and have paid him almost a hundred thousand dallors to move. he has squandered all the money on non business related items. the business i would be taking over would need some money to finish remodeling before reopening

Law Pro :

Wow, you didn't get involved or demand that the money paid to him by the state be placed in escrow?

Law Pro :

This business was in a rented property OR did the sale include property?

Law Pro :

Has the state finished paying them all they are suppose to pay him to relocate?

Customer:

rented property. and i wasnt aware he was getting this money until recently.

Customer:

yes they have

Law Pro :

Then you should file suit immediately and hope that there is some monies left.

Customer:

the state is tearing the whole block down to put in turn lanes at the intersection

Law Pro :

Did this buyer incorporate - or what form is the business?

Law Pro :

Is your agreement with an individual or corporation?

Customer:

im pretty sure there are no momies left

Customer:

individual

Customer:

sorry monies

Law Pro :

Then you should immediately retain an attorney and file suit to take back the company AND recover monies paid to them by the state.

Customer:

unfortunately i cannot afford an attorney at this time. my health issues have kept me out of work for 2 years. even if i won . this person has no money or assets other than the business. which at this point is all i want

Law Pro :

That this individual wrongfully hasn't paid you pursuant to the contract PLUS they are being fraudulent - taking the monies paid to relocate and fraudulently not putting the monies into relocating.

Law Pro :

So what are you looking for here at JustAnswer?

Customer:

a couple of things. one....i was going to go to the courthouse and file. but i dont know what papers to ask for or how i should fill them out. and two.... should i risk taking this to court without an attorney. i am really in a bad situation, not being able to afford an attorney. do you have a rough idead what something like this would cost me in attorneys fees???

Law Pro :

Pursuant to your agreement - upon ten day written notice to the buyer to cure such default, and buyer failure to cure such default within ten days, seller may terminate this agreement and buyer shall be required to return all assets purchased under this agreement to buyer - you need to send the buyer a written notice to cure their default with the additional language that if they don't you will be taking back all the assets of the company.

Customer:

i have done so

Law Pro :

First, you must send the buyer a notice of default.

Law Pro :

Second, if you done that, then you take back the business.

Law Pro :

Who's name is XXXXX XXXXX in at this time?

Law Pro :

Yours or the buyer's name?

Customer:

i have sent three notices. 2 of them were 10 day default notices and one notice to let him know that i am ready to take him to court

Customer:

he has not responded

Law Pro :

Who's name is XXXXX XXXXX in?

Customer:

there is no lease on the old building and the new lacation the lease is in his. i wasnt aware he was moving until recently

Law Pro :

Then you are going to have to file a civil action against the buyer for default and a request for an immediate injunction for the business to be turned over to you and for an accounting.

Law Pro :

Unless you have experience drafting legal pleadings then I would suggest you retain an attorney because the procedures for obtaining an affirmative injunction are difficult even for attorneys.

Customer:

any idea what an attorney is gonna cost me?

Law Pro :

Yeah, it would appear that the buyer isn't being intimidated by your letters of default. So, it would appear that your only options are to pursue an injunction in the matter.

Law Pro :

What the possible legal fees you could incur would be largely dependent upon how vigorously the buyer fights you in court.

Law Pro :

This could be anywhere from just a $1m to $10m or more - it's all dependent upon what the attorney has to do and how much time they spend on the matter.

Customer:

the only assets i would get would total about 10,000 dollars. is it worth taking to court . or could it cost me that much in legal fees

Customer:

this a very small business

Customer:

excellent income but very low overhead and equipment costs

Law Pro :

But your agreement states that you can recover legal or attorney's fees from the buyer - you stated, "buyerwill also be liable for all costs including attorneys fees incured by seller in enforcing this agrreement."

Customer:

i spose i could call my attorney. only reason i came here first is my lawey charge me everytime i call. his secretary called me once to ask if i had called them and i said "no". they sent me a bill for 200 bucks for that call

Law Pro :

I think you could also pursue this buyer for additional monies that they received from the state too.

Law Pro :

The attorney shouldn't have "billed" you unless you actually called them. I wouldn't have paid that $200 bill if you didn't call OR they didn't respond to your question.

Customer:

i'll give him a call. thanks for the input. i really appreciate it.

Law Pro :

There are always problems when selling a business over time - there is always the possibility of the buyer defaulting.

Customer:

i have another attorney i can call

Customer:

hes a malpractice lawyer but im sure he could refer me to some one else.

Law Pro :

That's why the agreement of sale should have some sort of security - not just taking the business back.

Customer:

do you mind if i ask you another question not related to this? or should i open another question

Customer:

its a quick one

Law Pro :

Yes, I would absolutely pursue this buyer because they should also be liable to you for the monies paid to them from the state too.

Law Pro :

What's your other question?

Customer:

im gonna call right awat

Customer:

other question

Customer:

i was involved in a lawsuit with a dentist. i won but he filed bankrupcty. am i out of luck on that case.

Customer:

the damage he cauysed is why i havent been able to work in 2 years

Law Pro :

It all depends - if your claim against the dentist was for malpractice - then most likely you're out of luck.

Customer:

figures. ok i'll let ya get back to business. thanks for your time

Law Pro :

However, if for fraud or something else - that survives the bankruptcy if you would go in an file a "proof of claim" and argue against the dentist being able to discharge your judgment against him.

Customer:

it was malpractice

Customer:

he worked on teeth he wasnt suppose to without my permission

Law Pro :

Did you file a proof of claim in the matter of his bankruptcy?

Law Pro :

How long ago did you get notice of his filing bankruptcy?

Customer:

no i dont know. i had an attorney handleing it. he said he would keep in touch. i never heard from him

Law Pro :

Then I would contact the attorney to see what the status is and if they filed a proof of claim on your behalf.

Customer:

ok great. thanks

Law Pro :

If they didn't file a proof of claim - then your claim was, or is, most likely discharged or going to be discharged by the bankruptcy court - then you can collect upon your judgment.

Customer:

ok

Law Pro :

I'm sorry - then you CAN'T collect on your judgment.

Customer:

ok. i have to find the paper work and call him too then. tahnks again

Law Pro :

You're welcome. Good luck. I wouldn't let that buyer go - but go after him for breach of contract PLUS fraud.

Customer:

i will. thanks. you have a great day. i'll shoot ya a mesage when its all over and let ya know how it truned out

Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24,870
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations
Verified
Law Pro and 87 other Business Law Specialists are ready to help you
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Customer reply replied 4 years ago


just a follow up question if you dont mind. the buyer owes me a balance of 6900 dollars. i decided to just sue him in small claims court. i have the paper work filled out and i am ready to file. my concern is this: if the judges finds in my favor and he orders the buyer to pay me the balance, can the buyer file bankruptcy and im out the money AND the business. or if given the choic, should i just take the business back instead of the money? i would rather have the money only because i hate to take the business back after he has paid in over 30,000 dollars on the contract so far.

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Law Pro
Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24,870
24,870 Satisfied Customers
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations

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