Would it hold up in court if I tried to get out of a contract to buy into a business due to being totally in the dark about a silent partner and the money that is being paid them monthly?

I recently bought out one of the co-owners of a business and we have a buy-out contract together. After buying into the business thinking I only had one business partner, I found out that there was a third, silent partner that we were paying profits to monthly. There was no mention of this in the buyout contract whatsoever and was a total surprise to me. Would this be a legal issue worth taking to court?

Asked on August 30, 2015 under Business Law, Pennsylvania


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Yes, this would be grounds to void undo the contract and/or seek monetary compensation on the basis of fraud fraud is a material mispresentation or important lie made with the intention that you rely or act on it which is reasonable for you to rely on so no reasonable or logical warning signs and on which you do in fact rely. Mistating the number of partners and that company's finances e.g. hiding the payment to the silent partner is a material mistatement upon which you relied, and there was no way to you know otherwise no way to know about the silent partner until you were told, so your reliance was reasonable. d on what you write, you appear to have grounds to take legal action based on fraud.

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