How may I cancel my business purchase contract due to Corona Virus without a force majeur clause?
I have entered into a purchase business contract with a seller located in Florida. Here are some information to help you understand better the situation:
- I have put escrow money on the business
- The due-diligence period is over
- The closing date is April 30th.
- Business plan submitted to the bank for a SBA loan
The bank has denied my loan. Furthermore, I would like to cancel the contract because of the insecurity of the situation especially that it is a non-emergency transportation business and clients are in nursing homes and hospitals and are only going to necessarily appointments. I estimate the business financial today being 30% lower than they were.
My broker that represents both parties (seller and myself - buyer) has pushed to extend the closing date to May 31st, 2020. There is no force majeur clause in the contract. The only contingency is the loan approval.
Here are some close that might be important for you to read:
2. CLOSING DATE: The undersigned hereby agree to execute any and all documents necessary to close this transaction. The Closing Date for this sale shall be on or before April 30, 2020. Any extension of this Closing Date must be in writing and signed by Buyer and Seller.
16. DEFAULT: If Buyer fails to perform this Contract within the time specified herein, including the payment of all deposits, the deposits paid by Buyer may be retained by Seller as liquidated damages and full settlement of any claims or the Seller may proceed in equity to enforce the Contract. If Seller chooses to receive all deposits as liquidated damages, the Seller agrees to disburse half of the deposits to the Broker(s) involved. The “listing agreement” between Seller and Broker shall continue in full force and effect. In the event Seller shall default by failing to perform any of the covenants contained in this Contract, or fails to provide information specified herein within five (5) days after a written request from Buyer to do so, or to otherwise close according to the terms and conditions of this Contract, Buyer may seek specific performance or terminate this Contract and receive the return of Buyers escrow deposit, as well as seek reimbursement for any and all reasonable legal and accounting fees and other costs incidental to inspecting the Business.
44. SBA FINANCING: This Contract is contingent to buyer to obtain SBA financing at a fixed rate not to exceed 5.75%. Buyer agrees to complete all documents necessary to apply for financing, including Business plan and pro-forma, and start the financing process no later than one week of completing due diligence and obtain a loan commitment no later than March 31. If the financing process takes more time than expected, by no fault of buyer, Seller agrees to extend the closing date for a period not to extend 30 days. If financing cannot be obtained, by no fault of Buyer, and with assistance of Broker, then this contract will be terminated and all deposits returned to buyer.
Your help would be very much appreciated.
1 Answer from Attorneys
Even without a force majeur clause you might be able to claim frustration of purpose or some other defense to enforcement of the contract. You should consult with an attorney to determine what options you may have. Please contact my office to discuss this matter futher.
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