Legal Question in Business Law in California
I sold a pet sitting business with a contract stipulating the payment schedule being 50% of the gross monthly profits, I have doubt that this is what she is paying me. Do I have the right to ask to see her log books and bank statements, since the business is technically not hers until the final payment is made. The contract is for 18 months. Thank you, Kathleen
1 Answer from Attorneys
You need to go back to the contract itself. The right to inspect, review or audit the buyer's books SHOULD have been an express term of the contract, given the nature of the payments. However, even if you were not given the right to see her books under an express provision, a court would probably find that such a right is an implied term of the contract, since there is no other way to know whether the payments made are anywhere near correct. On the other hand, your conclusion "...since the business is technically not hers until the final payment is made" is neither necessarily a reason why she must show you the books, not an accurate statement of when ownership (title) to the business passed. If you buy a car on credit and wreck it the next day, I'm sure you'll agree that the car was "yours" and not the dealer's, and that you and not the dealer are responsible. Here, you are the dealer; the business is the buyer's, and all you have is an interest in a stream of payments. Also, suppose one of the pets in the buyer's care got sick, or bit someone. You would, quite properly, say "Not my problem--she owns the business now!" So, I think you have a right to audit the payments, but not because the business is technically still yours, but because review of the books is either an express or implied term of the contract of sale. One final note: it is remotely possible that you do indeed still technically "own" the business, because a business sale can be so set up - but it is rare.
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