I recently sold a company to an individual in NY. Now this individual is complaining left and right, and I can't deal with it anymore. There is one issue that is legitimate on his end, but the others are absurd. So I am willing to negotiate on the one issue, and to come down in a settlement negotiation. Now the individual is threatening suit and saying there are other issues. He is saying that there are compliance issues. I never had compliance issues before I sold the company to him, and he did his due diligence and I provided him with everything he needed. He did not retain counsel for due diligence and to review the PSA, he signed the PSA which is very beneficial to me. Now he is bringing up issues outside of the PSA, saying that the PSA doesnt contain what we negotiated.
Is it my fault that the PSA doesnt contain his arguments? He should have retained counsel for this, correct? He did his due diligence and nothing came up under compliance issues before. I used an attorney for the PSA, but now I don't want to spend so many financial resources for that. What do you recommend? Thank you for your help. If he sues, then I will retain a good attorney.
Lawsuit / Dispute Attorney
Yep, stand your ground. Make sure in your negotiations that he does not re-create history so it looks like you knew something on the compliance concerns prior to the sale.
It is unclear whether you have closed the sale (and the buyer is having "buyer's remorse) or you have yet to close and you are negotiating certain issues to get it closed. If you have not closed, I suggest you get an attorney ASAP. I would be happy to speak with you on this matter.
Otherwise, assuming you have closed, a well written PSA should have a limits to your liability and the amounts for which you may have to indemnify (i.e., reimburse) the buyer post-closing. Additionally, you have to review the representations and warranties you made about your business. So, even if the buyer has a legitimate complaint, depending on what your PSA states, the buyer may be out of luck.
In Illinois, generally speaking, if your PSA does not contain both
an integration clause (i.e., this PSA reflects the entire agreement between the parties), and
a "reliance" clause (i.e., neither party may rely on any representations, warranties, etc that are not expressly stated in the PSA)
then your buyer will have a very difficult time in bringing up issues outside of the PSA.
This answer is for informational purposes only and is not intended to be legal advice nor does it establish an attorney-client relationship. You should consult a local business lawyer to obtain legal advice that is tailored to your circumstances and facts. Good luck to you.
Consumer Protection Attorney
Just a correction of a typo in Mr. Flemenbaum's thoughtful answer.
When he wrote: "In Illinois, generally speaking, if your PSA does not contain" he meant "if your PSA does contain." I think he began the sentence to warn you of the danger of the absence of these clauses, and ended it explaining the benefit that such clauses would give you.
Thank you for the clarification Mr. Asch.