Kansas | Business Law
Legal Question
I bought a small service company in MO. The contract was signed in KS where both byer and seller live. The customer contracts are listed in the asset purchase agreement and he said they are in the office files. After the sale of which contracts were to be delivered at the closing he stated they are in the files in the office. They were never found and some monthes later he admits that they are handshake contracts between him and the customers. The customers will not honor the contracts with me as they are between them and the seller. What I now have bought is a few hard assets and no goodwill or contracts.
Can a person sell a handshake contract without the other parties knowledge? Do I have any legal recorse?
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Legal Answer
If the seller represented to you that he had contract with clients and you made the purchase based on having such contracts (and presumably a monthly cash flow from those contracts), it appears you would have a good case for breach of contract, possibly fraud, and other causes of action. A very important consideration will be what you paid for the business versus the cost of filing suit as well as whether you can recover from the seller if you obtain a judgement. Very difficult situation and very unfortunate.
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Post Warren Lindstrom, LLP 12980 Metcalf Avenue, Suite 180 Overland Park, KS 66213
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Legal Answer
Putting aside the question of the assignment of a handshake contract, it is clear that you have a cause of action for breach of contract and possibly fraud. Does the asset purchase agreement specifically identify the contracts to be assigned? If so, damages can be determined either by the amount of consideration paid, or the fair market value of those contracts. Feel free to contact me if you want to pursue this.
Sean Santoro/Licensed in KS and MO/ sean@roadlawyer.net
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Santoro Law Office P.O. Box 455 Bonner Springs, KS 66012
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