Do we have recourse if an investor backed out after a signed contract?

UPDATED: Oct 1, 2022

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Do we have recourse if an investor backed out after a signed contract?

I am working with a start-up and we had someone commit to investing a small
amount of money in the company in return for equity. A basic contract was signed
by both parties and the money was expected fairly quickly. After months of no
money, the potential investor finally backed out of the deal. The investor was
asked multiple times over the past couple of months if he was still going to
invest and repeatedly told us yes, even after given the option to back out. The
money was needed for development and put us back a few months, which greatly
hurts us as this is a new technology and needs to hit the market as quickly as
possible. What can we do? The company is based in Ohio and the investor is based
in Arkansas.

Asked on November 26, 2017 under Business Law, Pennsylvania


S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

You can sue the investor for breach of contract.
Damages (monetary compensation you are seeking in your lawsuit for breach of contract) may be difficult to prove with regard to development being delayed.  You will need to quantify the losses from that.
Your company is the plaintiff.  The investor you are suing is the defendant.  A lawsuit can be filed in the state where the plaintiff resides or in the state where the defendant resides or in the state where the claim that is the subject of the lawsuit arose.  For convenience purposes, it would be advisable to file your lawsuit in OH.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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