Lesson 59: A Good Deal? Get It in Writing
From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).
Dave, who was an immigrant with limited formal education, bought a taco stand from a woman who made oral representations that the business was very profitable. She used an attorney to draw up a purchase contract that detailed the series of payments Dave would have to make, but failed to include any representations about either the profitability of the business or other essential terms such as access to parking. And, unfortunately, Dave failed to have an attorney review the contract. He also failed to have an accountant look at the books for the business.
As it turned out, the business had no rights to parking. Without parking, Dave had few customers and could not attract more. In addition to the money Dave paid up front for the business, he spent a great deal of money on operating the business for several months. The business was not making any profits and he soon had to close it. Dave lost everything he paid for the business, plus the initial startup money he invested.
To add insult to injury, Dave was sued by the business seller for the remainder of the payments under the contract.
The Lesson: Be sure to include all important aspects of the deal in any written contract. If it is such a good deal, then both sides should be willing to put all the important promises and representations about it in writing. Also, keep a hard copy of the contract because electronic copies may be corrupted or destroyed.