When buying a small business and after escrow, is closed is there any chance of rescinding the contract or renegotiate it?

UPDATED: Dec 5, 2011

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When buying a small business and after escrow, is closed is there any chance of rescinding the contract or renegotiate it?

M husband bought this place.The seller misrepresented the income information to convince my husband to buy this business at $90,000 with $1000 installments per month putting our condo which is already paid in a Deed of Trust. Its been a month and the pizzeria doesn’t make enough money to even pay for all the expenses. It was a terrible deal. Is there a way out of this protecting our condo at the same time? The price is too high and we don’t want to loose the condo.

Asked on December 5, 2011 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If the seller did indeed knowingly or intentionally misrepresent the pizzeria's income, which is a material or critical factor in a business sale, that misrepresenation might constitute fraud; if it does, that could provide grounds to rescind the agreement (you give back the business and get your money back) and/or seek compensation. From what you write, it would be worthwhile to consult with an attorney, who can evaluate the facts (and the evidence you can bring to bear) and advise you as to your rights.

Note that it is not fraud if *you* cannot *now* make as much money as the prior owner  did--that could be due to you not running it as well, increased competition, changing market conditions, etc. It would be fraud if he lied about the income the business did in fact bring in for him, since that would be a lie about an actual fact, and not a projection about the future, which is subject to change.

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