Your Legal Questions Answered
I bought a business (franchise) and am now having to file bankruptcy. There is a lot to the story but the gist is: I was told I was taking over a full functioning business, yet it was gutted when I arrived- having to take out further investments that I could have paid off my franchise fee... the franchise is now coming after me for, hence the bankruptcy. I just found out that the prior owner filed bankruptcy for the same reasons. The fact that the prior owner filed bankruptcy and the franchise knew all of the equipment and clients were not present, left me with a larger financial burden than was originally presented to me. I was taken advantage of by not being able to take the viability of the business into an accurate account, is there any case that I can make on non-disclosure?
The facts are definitely suspect, and worthy of further investigation. Based on the circumstances you described, it sounds like you could potentially have a case for misrepresentation or fraud. Here's why:
Misrepresentation: If the franchise or the previous owner gave you false information about the state of the business before you purchased it.
Fraud: If the franchise or the previous owner deliberately concealed material facts about the business that they had a duty to disclose to you (such as the previous bankruptcy or the loss of equipment and clients), that could potentially be fraud.
Breach of contract: The franchise failed to meet its obligations to you as a franchisee.
A lot will depend on the actual correspondence, franchise agreement, and other representations made by the parties. (Please note that contingent claims are a part of the bankruptcy estate, so I would recommend speaking to us before you file. If you've already filed, I would make your bankruptcy attorney aware of a potential claim against the franchisor.)
I would recommend speaking with us to determine if you have a case. Please ask for a consultation with David Hannum, partner at the firm, for a franchise dispute who as particular experience in this area of law. You can reach us at (303) 688-0944.
The foregoing information is general information only and should not be relied upon to take, or fail to take, legal action. No attorney-client relationship is formed by this information. __The only manner to obtain complete and adequate legal advice is to consult with an attorney.__
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