What to do about an option contract and current liabilities?

I placed an option contract on a business that is a going concern. A term was that the business was to be free and clear of debt. We have studied the reconciliation of income/cash-in-hand against the known liabilities excludes tax liabilities and discovered there is insufficent funds to pay the current liabilities. We believe the owner should pay the outstanding bills debts. Do you agree? This business is a going concern.

Asked on September 18, 2012 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

There is no way to answer the question in the abstract: the answer depends on the precise terms of the agreement. What you describe certainly seems plausible or reasonable, you need to have an attorney review the agreement (and any correspondence, early drafts, etc. involved in negotating it) to really understand not just your rights and the seller's responsibilities, but also your remedies--that is, can you cancel the contract? reduce the sale price by the amount of the liabilities? etc.

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