Is there a buyer protection when purchasing a business?
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Is there a buyer protection when purchasing a business?
Hello
I have purchased an existing business a franchise. The previous owner, the
person we have purchased the business from has provided us with paperwork
showing his financials for the past few years. The franchise told us they can
not provide us with the same paperwork for us to compare numbers and assured us
that all numbers should be the same. After taking over the business we have
gained access to the franchise computerized program and were able to view the
business earnings for the past years. The numbers are very different then the
ones we were provided with when purchasing. If we have had access to the real
earnings, we would not have purchased the business. Is there such thing as buyer
protection? Can we do anything about it?
Asked on April 12, 2018 under Real Estate Law, Alaska
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
There is no buyer protection per se, the way there are rules in certain other transactions (mortgages; home construction/renovation; Lemon Laws for cars) to protect the buyer. That said, fraud is not permitted: fraud is an intentional or knowing misrepresentation (basically, a lie) of a material or important fact, like company financials. If the seller knew that the numbers were different or less good than was being represented but did not disclose that fact, that may well be fraud; fraud can provide a basis to possibly rescind (undo) the transaction, or at least to seek monetary compensation. So if they hid the true numbers from you, you may have grounds for a lawsuit based on fraud; consult with an attorney to explore this option.
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