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Fraud in Post-Sale Commercial Business Transactions

by | Nov 1, 2015 | Business Law


Unfortunate situations can pop up during commercial sales of businesses – frequently due to the fact that sellers of the company may have misrepresented facts regarding the business for sale or fail to disclose important information to their potential buyer. When a party decides to sell a business, they are required to disclose information pertinent to the sale to their prospective buyer. It is only natural for a seller to put present their property positively to the individual or group they hope will make the purchase, but there is a line should never be crossed. Too often, the line is crossed and sellers are actively deceiving their buyers.

If you feel that the buyers in your recent commercial business transaction crossed the line into deception you can take legal action. The first step is to prove that the defendant (in this case, the seller) behaved fraudulently by showing that the following occurred:

The buyer knowingly made a misrepresentation (concealment, nondisclosure, false representation, etc.) with the intention to defraud you, the buyer, and that you, the buyer, relied on the seller’s misrepresentation and, as a result, suffered damages.

Please note: the statue of limitations on fraudulent actions is 3 years from the date the facts indicating fraud are discovered.

A common problem is in defining “misrepresentation” as it applies to fraud in relation to the sale of a business. In this situation you can describe a misrepresentation as any verbal statement, gesture, omission, purposeful concealment or even negligent misrepresentation of the entity or property. In many cases, fraud in relation to the sale of a business is the simple act of not fully disclosing financial records that represent actual business profitability.

If you feel you have been the victim of a fraudulent business transaction, you will not only be required to show the misrepresentation that occurred on the part of the seller, but that you reasonably relied on that misrepresentation for your purchase. This means that you have an obligation, as the buyer, to use common sense when accepting statements from the seller as factual. This is why it is vital for any buyer to conduct their own due diligence investigation of a business prior to finalizing the transaction (and prior to signing any contractual agreements).

If you are a victim of a fraudulent business transaction, contact the southern California business attorneys at The Law Office of the Law Office of Ernesto Aldover so you can take the first step towards holding the proper party responsible.