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Breach (of contract) by Greed!

June 03, 2013

Posted in Business Litigation, Business Start Ups

864516_high_contrast_office_6When I represent a business client in a business transaction where the compensation will be based on a percentage of a certain level of revenue, I always advise the client to make sure that the contract has a provision that gives them the rights to access the company books and records for audit by an independent Certified Public Accountant. Sadly, in today’s business environment, breach of contract is no longer a moral issue, but instead an issue of profitability.

What do I mean by that you ask? Well, the logic is simple. In all my years of experience dealing with business cases, I have often found that when a business will profit or save more by breaching a contract and doing business with someone else, the decision to breach is generally made on that basis. Thus, the consequence of the breach is the determining factor, not the moral value of whether the decision is right or wrong.

For example, Jeremy Stenberg, an Orange County World Champion dirt bike racer was sued for breach of contract in the Orange County Superior Court. His agent, McClellan Nichols Sports Syndicated LLC, sued Stenberg and alleged that Stenberg intentionally had not reported his real income by hiding it under a couple of shell entities created in Wyoming. McClellan claimed that it had a contract with Stenberg for exclusive representation. In return, McClellan was entitled to 20% of Stenberg’s revenue and 10% of Stenberg’s corporate sponsorship. Although, Stenberg terminated McClellan’s contract for representation, McClellan claimed that the breach occurred when their contract was in effect. Thus, due to Stenberg’s breach, McClellan was deprived of compensation in accordance with the agreement.

If the allegation is proven at trial, I would be willing to bet that Stenberg just want to keep more of his money by not paying his agent’s share as he had agreed to. Moreover, if the allegation is proven true, was Stenberg’s action created by his greed? Maybe, but I am sure that he was not thinking about whether his actions were right or wrong at the time.

If you feel that you are not getting your fair share based on the contract that you entered into with another person or business, you need to consult with an experienced business trial attorney to find out your legal options. Contact the Law Offices of Tony T. Liu today.