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I'm working on an agreement. My corporation is a buyer. Their corporation
is a seller of assets to us. The seller corporation is owned by one person.
They want payment to be made to the owner's personal name and not their
corporation name. I know contracts need compensation to be valid, so how
does this affect things? Could they reasonably say, at a later day, that no
compensation was given?
Can the parties stipulate to this arrangement somehow in the purchase
agreement and the agreement still be considered valid with valid
compensation for the seller corporation? If so, can you give me a sentence
to insert for this purpose? Thanks.
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"AFN" <DELETEnewsgroupCAPSaccount@yahoo.com> wrote in message news:<09Dhd.31319$jo2.28278@twister.socal.rr.com>...
I'm working on an agreement. My corporation is a buyer. Their corporation
is a seller of assets to us. The seller corporation is owned by one person.
They want payment to be made to the owner's personal name and not their
corporation name. I know contracts need compensation to be valid, so how
does this affect things? Could they reasonably say, at a later day, that no
compensation was given?
Can the parties stipulate to this arrangement somehow in the purchase
agreement and the agreement still be considered valid with valid
compensation for the seller corporation? If so, can you give me a sentence
to insert for this purpose? Thanks.
Value given to a third party can be valid consideration for a
contract. But this one smells like the seller has something afoot.
Two reasons for wanting payment made to oneself instead of one's
corporation would be that the corporation is in some kind of trouble,
and liquid assets found in the corporation are subject to levy; or
that the owner is scheming to extract cash from the corporation
without paying taxes.
Because of the potential for abuse in this kind of transaction, I
would be a stickler for payment to the corporation.
--
Not a lawyer,
Chris Green
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I'm working on an agreement. My corporation is a buyer. Their
corporation
is a seller of assets to us. The seller corporation is owned by one
person.
They want payment to be made to the owner's personal name and not
their
corporation name. I know contracts need compensation to be valid,
so how
does this affect things? Could they reasonably say, at a later day,
that no
compensation was given?
Can the parties stipulate to this arrangement somehow in the
purchase
agreement and the agreement still be considered valid with valid
compensation for the seller corporation? If so, can you give me a
sentence
to insert for this purpose? Thanks.
Payment to a third person is generally valid consideration if the
parties include it in the bargain. If I sell my car and direct that
payment be made to one of my creditors, or to my child's university,
or to the Red Cross, that's perfectly good consideration. The
corporate seller may direct that payment be made to some third person,
including the corporation's only shareholder. Their purpose is
usually not the buyer's business. In some cases it's enough just to
include a clause which says buyer's payment to third party is
consideration for the transfer of assets to buyer. In some cases that
would be good enough even if the buyer has no idea why the seller
wants payment to be made this way.
Usually, all the buyer needs to do is make sure that:
(a) the corporate seller, by language in the purchase agreement,
really is directing that payment go to the shareholder,
(b) the corporation is a corporation in good standing with the state,
(c) the board of directors has authorized the transaction, including
the details of where payment is being directed,
(d) the person signing for the corporation has authority to sign. In
some states, more than one officer would need to sign,
(e) the buyer has a fishhook firmly stuck in the seller's neck in case
something goes wrong, such as half of the money won't be paid until a
year after the assets are transferred.
There are clauses and procedures to accomplish all of that. If you
are not an attorney and your company is not using an attorney for the
transaction, then you or someone else needs to become expert in how to
draft the agreement. It would be much easier to simply get a business
lawyer to handle it.
McGyver
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I'm working on an agreement. My corporation is a buyer. Their
corporation
person.
their
so how
that no
purchase
sentence
Payment to a third person is generally valid consideration if the
parties include it in the bargain. If I sell my car and direct that
payment be made to one of my creditors, or to my child's university,
or to the Red Cross, that's perfectly good consideration. The
So what happens when something goes wrong? You make your payment
to the third party (who may or may not know anything about this
contract). The shipment arrives, and it turns out to be a box o'
rocks that is valueless. The corporation has negligible assets
(and not the payment you just made and want back, and whatever they
tried to sell you never existed). Can you get your payment back
from the third party? (Even if the third party was, say, the
American Red Cross, who knows nothing about the contract but says
donations are not refundable?).
....
Usually, all the buyer needs to do is make sure that:
....
(e) the buyer has a fishhook firmly stuck in the seller's neck in case
something goes wrong, such as half of the money won't be paid until a
year after the assets are transferred.
Are you sure you don't mean a fishhook of mass destruction? You could
still get scammed out of only half of the alleged value of all that
Nigerian currency.
Gordon L. Burditt
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I'm working on an agreement. My corporation is a buyer. Their
corporation
is a seller of assets to us. The seller corporation is owned by
one
person.
They want payment to be made to the owner's personal name and not
their
corporation name. I know contracts need compensation to be
valid,
so how
does this affect things? Could they reasonably say, at a later
day,
that no
compensation was given?
Can the parties stipulate to this arrangement somehow in the
purchase
agreement and the agreement still be considered valid with valid
compensation for the seller corporation? If so, can you give me
asentence
to insert for this purpose? Thanks.
Payment to a third person is generally valid consideration if the
parties include it in the bargain. If I sell my car and direct
that
payment be made to one of my creditors, or to my child's
university,
or to the Red Cross, that's perfectly good consideration. The
So what happens when something goes wrong? You make your payment
to the third party (who may or may not know anything about this
contract). The shipment arrives, and it turns out to be a box o'
rocks that is valueless. The corporation has negligible assets
(and not the payment you just made and want back, and whatever they
tried to sell you never existed). Can you get your payment back
from the third party? (Even if the third party was, say, the
American Red Cross, who knows nothing about the contract but says
donations are not refundable?).
The buyer can't get anything back from the Red Cross or any other
third party payee. All the buyer can do is sue the seller. That's
not a reduction in the buyer's rights. If payment had been made
directly to the seller, and the buyer sues, there is no entitlement to
receive back exactly those same dollars. The result of the suit is a
judgment. Then the buyer tries to collect on the judgment. The
original dollars are gone because the seller disposed of them somehow.
So if payment is made to a third party, nothing has changed. The
buyer can still sue the seller, win a judgment, try to collect.
There are exceptions. Like in bankruptcy. If the seller is
insolvent, it's possible for a creditor to force an involuntary
bankruptcy. Then the trustee, prodded by the creditors, can demand
refund of preferential payments, including to the Red Cross. That
remains true regardless of whether the payment to the Red Cross came
from the debtor or by a third party payment from the buyer.
Usually, all the buyer needs to do is make sure that:
...
Are you sure you don't mean a fishhook of mass destruction? You
could
still get scammed out of only half of the alleged value of all that
Nigerian currency.
That was the point. If you hang on to half the money, you only lose
half as much. That might be a good deal, if the corporate assets that
turn out to be good have a value far exceeding half of the agreed
contract price. So some of the assets turn out to be phony. Maybe
the value that the bad assets should have had is only 10% of the
contract price. And the buyer hangs on to 50% of the contract price.
Maybe nobody sues anybody and buyer got a great deal. Regardless of
who sues whom, buyer gets to hold the money until the matter is tried
or settled.
Naturally, if the situation is such that all of the assets might turn
out to be phony, or owned by someone else, or subject to encumbrances,
or the sale might turn out to be unauthorized, or whatever, don't pay
anything up front.
McGyver
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