If I am a business owner and I am being sued in a small claims court for a contract that I had no knowledge of. am I liable?

The business I have is a seafood restaurant. my son opened the restaurant but passed away a couple months back so I became in charge of it since my name was on paperwork. The person who was doing business behind my back was my daughter-in-law .

Asked on July 19, 2012 under Business Law, California


Ian Kravitz / Malka & Kravitz, P.A.

Answered 8 years ago | Contributor

While the business is generally obligated for conrtacts entered into prior to your taking over, you personally are not.  It is only in rare circumstances, that you individually are a proper party to a suit.  If you personally have been sued, you should be able to win dismissal in most circumstances.

As far as whether the business is liable, this will likely depend on whether your daughter in law either had authority to bind the business, and if not, whether the claimant was reasonably justified in believing that she possessed such authority.  You will unfortunately need to retain legal counsel to protect you.

Anthony Van Johnson / VANJOHNSON LAW FIRM, L.L.C.

Answered 8 years ago | Contributor

Your question is whether you are liable as a business owner for contracts entered into by the previous owner of the business, although you had no knowledge of the contract.  Generally, when you take over a business, you then become liable for the debts and contractual obligations of the business.  You should immediately consult an attorey to enable that attorney to obtain more detail on the facts of the disputed contract.  If all else fails, you may be able to mediate the issues or reach a fair settlement.  Without more information, it is difficult to provide a more detailed answer. 

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