Question for our fine legal minds

[Safety Blitz]

Had a beer with my neighbor tonight. He finds himself in a strange situation.
"A" started a small local business many years ago. As the business grew, he hired "B" as his employee.
As "A" approached retirement time, he told "B" he would sell him the business at a bargain rate for all his years of service. Here's the issue: It was a handshake deal to be paid over 10 years.
After "A" retired, "B" formed an LLC and tried to make a go of it himself but needed help. So he hired "C" (my neighbor). "B" couldn't afford to pay much, so the deal was "C" would work a few years at a reduced rate then become a 50-50 partner. That partnership was formed a couple years back.
The 10 years for "B" is nearly up and now, out of the blue, "A" is attempting to renege on the agreement to sell. He is claiming he has only been leasing to business and equipment to "B" all these years and expects these lease payments to continue into the future.
So, is my neighbor SOL? He knows there should have been a sales contract, but that's water under the bridge.

 

[ChiTownLion]

SOL.

 

[fairgambit]

Had a beer with my neighbor tonight. He finds himself in a strange situation.
"A" started a small local business many years ago. As the business grew, he hired "B" as his employee.
As "A" approached retirement time, he told "B" he would sell him the business at a bargain rate for all his years of service. Here's the issue: It was a handshake deal to be paid over 10 years.
After "A" retired, "B" formed an LLC and tried to make a go of it himself but needed help. So he hired "C" (my neighbor). "B" couldn't afford to pay much, so the deal was "C" would work a few years at a reduced rate then become a 50-50 partner. That partnership was formed a couple years back.
The 10 years for "B" is nearly up and now, out of the blue, "A" is attempting to renege on the agreement to sell. He is claiming he has only been leasing to business and equipment to "B" all these years and expects these lease payments to continue into the future.
So, is my neighbor SOL? He knows there should have been a sales contract, but that's water under the bridge.

Tell your friend to contact a competent attorney and pay him for his advice.

 

[Big 0]

As they say - Get it in writing.

 

[cment]

Sounds like everyone is screwed except "A" if nothing is in writing.

 

[NittPicker]

I'm no legal expert but if "A" wants to play games then I'd play some too although if "B" and "C" rely on the business as their sole source of income my games wouldn't be sensible. "B" and "C" could just close up shop and stop paying "A" since there are no supposed lease terms in writing. If he wants to renege and try to grab a piece of what "B" and "C" have been working for then screw him. If "A"s claim is he was leasing just the business and equipment I'd clean out every piece of inventory no matter how small. If the business folds there's no way for "A" to claim he is owed future lease payments. How will he prove it?

 

[LafayetteBear]

I'm no legal expert but if "A" wants to play games then I'd play some too although if "B" and "C" rely on the business as their sole source of income my games wouldn't be sensible. "B" and "C" could just close up shop and stop paying "A" since there are no supposed lease terms in writing. If he wants to renege and try to grab a piece of what "B" and "C" have been working for then screw him. If "A"s claim is he was leasing just the business and equipment I'd clean out every piece of inventory no matter how small. If the business folds there's no way for "A" to claim he is owed future lease payments. How will he prove it?

1. I agree with Gambit. This fact pattern is a bit complex, and raises a number of issues.
2. Big O is also right in noting something that lawyers repeatedly tell their clients - get it in writing. That seems particularly relevant here, since it appears the agreement between "A" and "B" called for the purchase of the business over a ten year period. That raises the question of whether Pennsylvania's "statute of frauds" (i.e., a law that says certain types of contracts must be in writing in order to be enforceable) applies here. In most states, one type of contract that is covered by the statute of frauds (and, thus, has to be in writing) is a contract that, by its terms, is "not to be performed within one year."
3. I also agree with NittPicker. "B" has some real leverage here, given that "A" was already retired, and "B" has been operating the business. Is customer good will and personal knowledge/ability of current management a significant component of the value of this business? If so, the departure of "B"" could cause the business to either fall apart or lose considerable value.

 

[The Spin Meister]

Options depend a lot on the type of biz. If there is little investment in equipment and buildings, one option could be to shut down the biz and re-open under a new name. If there is substantial equipment and assets, they may lose all of it in court....or to legal bills fighting it out.

Is there any evidence that "A" was involved in biz activities or was he totally absent? Ten years seems a long time to make a claim.

How long after "B" taking over did he form the LLC? If it was like 9 yrs ago and "A" didn't challenge or substantiate any claim, he may have lost his rights then.

Did "B" inform "C" of the handshake deal? Did "C" get that in writing? If not, "C" may have legal action against "B"

Talk to a very good attorney specializing in closing/sale of businesses. Average att that does family law and wills won't cut it here. All IMO and not an attorney!

Sounds like a real mess and will be interesting to hear how it all plays out.