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It’s something lawyers often say to people claiming to have a “contract” or “agreement” that’s supposedly broken. Often what supposedly was agreed to was never formalized in writing. Oral contracts are binding and enforceable. All the plaintiff has to do is prove it existed and both parties agreed to it. The fact the “contract” or “agreement” were only spoken words, often in the presence of no witnesses, can make that difficult if not impossible.
It’s not just Mom & Pop businesses who have this problem, as a lawsuit described in CNN/Money shows. At issue is the now halted $475 million dollar sale of Forbes magazine to a group of Chinese investors, doing business as in Hong Kong as Integrated Whale Media Investments.
The Forbes family has filed suit against Integrated Whale for failing to pay up. Its complaint, filed in Delaware in October, alleges Integrated Whale,
- Purchased the publishing business last year. It borrowed money from the Forbes family to finance the purchase and is accused of failing to honor its contract and defaulting on the loan.
- Failed to make its first interest payment due on October 1, 2014. The terms of the agreement require Integrated Whale to repay the entire amount of the loan, which it failed to do.
- Has “actively resisted … efforts to collect on the unpaid debt by any means necessary, no matter how improper…They have also wasted corporate assets and abused their position as controlling shareholder of Forbes Media.”
- Investors perjured themselves in court testimony in the British Virgin Islands in the course of another legal action Forbes filed to force the company to repay the loan and it “potentially faces being placed into liquidation due to its failure to pay its debt.”
Integrated Whale claims the lawsuit is “completely without merit” and it’s considering its legal options, according to a company statement. Forbes Media said the legal dispute doesn’t impact the company’s operations.
The dispute centers on a conversation that may or may not have happened, according to Business Insider. It reports that Sammy Wong, who lead the group of buyers, claims that in a conversation between he and Timothy Forbes (son of Malcolm Forbes and grandson of the magazine’s founder) he promised Wong the defaulted payment (the amount has not been published) would be forgiven.
The complaint states there was a meeting but denies any such waiver was given. Forbes claims the opposite message was given, they wanted immediate payment of the overdue interest. Forbes asserts there is no correspondence or document supporting Integrated Whale’s claim.
The goal of the lawsuit is that ownership of Forbes Media be returned to the Forbes family and Elevation Partners a private equity firm that owned a stake in the company. If that happens Integrated Whale would be out more than $350 million it’s already paid for the purchase.
Integrated Whale may ultimately be able to show that the debt was forgiven by Timothy Forbes, but it may be an uphill climb. If it’s true that there is no signed agreement, no documentation, no correspondence or witnesses to substantiate its claim it no longer owes the remaining debt Integrated Whale may end up being financially harpooned. If this in fact a gamble by Integrated Whale to try to keep ownership at a discounted price that ultimately fails the company may have to be liquidated.
If you are the buyer or seller of a business and the purchase agreement has been breached, or may be breached in the future, contact our office so we can go over what’s happened, your legal rights and responsibilities and your best legal options going forward.