Does a seller have to give a compensation for outstanding gift card balances?

UPDATED: Sep 30, 2022

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Does a seller have to give a compensation for outstanding gift card balances?

I am purchasing an existing restaurant, keeping the name and everything the $same, and there are over 58,000 in outstanding gift card balances. The seller is trying to tell me it was factored into the business valuation, which was conducted 2 years ago, and that it is part of the sale and she has no obligation to compensate for the outstanding balance.

Asked on March 29, 2017 under Business Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

No, she does not need to: the law does not require her to provide any compensation for this. It is purely a contractual matter: what the buyer and seller agree to, the same as they can agree to any valuation for (and way to handle) accounts receivable, intellectual property, ongoing contracts, inventory, etc. If you feel that that the gift card balances is an issue, you can try to negotiate something for (e.g. that part of the purchase price is escrowed for a period of time against the gift cards, and will be "debited" for redeemed gift cards, so that after the agreed-upon period of time, that portion "debited" for redeemed gift cards will be returned to the buyer, while the unredeemed potion will be turned over to the seller). So it is not a matter of what she does or does not have to do: it's what can you and she agree to, remembering that if you feel that due to this, it's not a good deal, you could choose to walk away and not buy the restaurant. (This assumed you have not yet signed a contract of sale; if you did, you are locked into what  you agreed to and have no leverage.)

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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