Creative Leisure News

Answers to your troubling and tricky legal questions.

A Legal Response for Small Business Owners

What to do when promises are broken.

By Eva-Marie Boyd (March, 2004)

(Note: Eva-Marie has been a practicing attorney for approximately 15 years. During that time she has been President of the Orange County Barristers, President of her law school alumni association, served on the Orange County Bar Association Board of Directors for seven years and as chair of the Orange County Bar Association Legal Referral Committee for three years. She was a panel attorney for California Lawyer for the Arts and has lectured for that organization on copyright issues.)

Mike sent me copies of the articles by the two small vendors that had been written for this publication, asking if I had any input. Subsequent to our conversation, I decided to briefly put my comments into writing.

(Note: To read the articles in question, click on "Vinny Da Vendor" in the left-hand column.)

To the company that thought they had a buyer, and in reliance thereon is obtaining patent protection, signed confidentiality agreements, provided names, etc,, if the contract was not in writing, it is possible that the combined actions rose to the level of an oral contract.

Oral contracts are almost equally as enforceable as written ones. I know lawsuits can be expensive, but even the mighty fall such as Barbie Doll. At the least you should be able to recover your expenses involved in the failed venture.

Please note: The statute of limitations for oral contracts is 2 years from the last act dealing with the potential contract.

To the vendor whose product was bought by a larger firm for distribution but no distribution was forthcoming � my legal response again is to sue them. If the sales contract has a performance clause, you are pretty much home free. If there was no performance clause, there is a legal term called "failure of consideration" which means that in the case of non-performance in whole or in part to that which was agreed to, the contract can be cancelled, damages allowed on a case-by-case basis, and again at the very least monies spent in reliance on the contract can be recovered.

Best of all, you get your rights back and are free to sell them to someone else. Again, please note: The Statute of Limitations for written contracts is four years.

(Note: To read previous columns by Eva, click on the title in the right-hand column. Have any questions regarding copyrights, trademarks, or other business-related legal issues? Your name will not be used. Mail, fax, or email your questions to Eva-Marie Boyd, 1160 Catalina St., Laguna Beach, CA 92651 fax: 949-497-3148; email LAWDDAW@aol.com.)