In May of 2008, I was approached to sell my snack food business. I was also offered the district managers job of a national chip manufacturer at the time. We settles on a price. the buyer told me needed to pay me out over a five year period. I agreed to that. Then he said it would have to be six years. At that time, I also negotiated a 2% royalty on a national cookie that I was selling. The buyer agreed and put a $20,000 per year cap on this clause. He was to puit down $20,000, then pay $2222 per month for six years. The royalty would be on top of that. He has refused to pay me the royalty for no other reason than he doesn't feel like it. He told me if I keep pushing him for that, then the $2222 per month would be in jeopardy. Now he is refusing to pay anything. I have tried to call and e-mail, and he still has refused. I e-mailed him that I would be suing him for breach of contract and would also file a Massachusetts Chapter 93A for unbfair and deceptive practices. I made sure all my t's were crossed and all my i's were dotted. I don't see how he can get away without paying. He has paid for 26 months, and I have copies of all the checks, he owes another 46 months for a total of $102,212, plus $100,000 for royalties. I have kept my end of the agreement, he has not. Should I go ahead with my lawsuit, and what are my chances?
2 Answers from Attorneys
As a Franchise Attorney I can tell you this. The overall strength of your contract action depends on how strong the signed documents are (contract of sale, etc.) as well as the provisions included (or not) in these documents. Just one example - do you have a attorneys fee clause? If not, you can easily spend $100k in attorneys fees. Even if you do have this clause, can you afford to pay your attorneys AND will be you be able to collect from your buyer at the end of the legal process, which can be years down the road? Your question cannot be answered off the cuff; a review of everything is required. Consult with a good business or franchise attorney in your area for specific advice.
Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.
Franchise Foundations, a Professional Corporation
Assuming you have a valid binding agreement, the issue is two fold:
1. Does the buyer have any defenses under the agreement? e.g. misrepresentation etc
2. Is the Defendant collectible? Is the buyer personally liable or is this a sale to a corporation?
3. Did you obtain a security interest in the business and file a UCC statement? if you did then you can foreclose on the business as well as sue for unpaid obligations and other damages.
Please feel free to contact me to discuss the matter without obligation. If your description of having everything covered and assuming the buyer has no real or valid defense, then you can sue and win. The issue will be is the Buyer collectable.
Again, please feel free to call me at my office to discuss your options without obligation.
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