What are a seller’s rights regarding the cancellation of the sale of a business if there was no contract?

UPDATED: Jan 4, 2012

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What are a seller’s rights regarding the cancellation of the sale of a business if there was no contract?

Seller is selling a small business nd the Buyer gave seller a deposit. There was no official contact and no verbal promises made. Seller decides to keep the business within the family but gave seller a different reason. Buyer refuses to take deposit back and threatens to sue. Does buyer have the right to do that? Should seller just mail the deposit back to them?

Asked on January 4, 2012 under Business Law, California


Kenneth Avila / Kenneth Avila, Patent Attorney

Answered 11 years ago | Contributor

Hi.  There are some key facts left out of your question that will change the answer but the key point to be made here is that many times oral contracts are enforceable.  Please resubmit your question and include the following:

The nature of your business.  Is it a shop where people come to make transactions or does the business go to the customer’s home (ie. pool cleaning)?  Is the location where the shop is located owned by the seller or is the seller renting?  Does the sale include tangible things such as inventory, tooling, equipment, and accounts receivables or just intangible things such a customer list or business name, or does the sale include both tangible and intangible things?

You said no verbal promises were made.  You need to state the wording you used to “induce” the buyer to part with their deposit.  A key point for you to remember is that the courts will look to the reasonable and objective expectations of the buyer.  If the buyer was reasonable in his objective belief that a contract was formed then a contract was formed.  This is a gray area so provide as much information as possible.

Finally I would need to know how the buyer made the deposit.  Did the buyer make it by check?  If so did you cash the check?  Did you give a receipt to the buyer for the deposit?  Was the amount of the deposit and your signature on the receipt?

Include those facts and an attorney will be able to give you an accurate answer.

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 AttorneyPages.com 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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