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Frequently Asked Questions About Business Disputes

Answering The Business Dispute Questions You May Have

At Golshani Lee LLP, we serve the small and medium-sized businesses of San Diego that have encountered various business disputes and challenges. Shervin Golshani and Christopher Lee, our business law attorneys, take the time to answer your questions personally. You can read some of their responses to frequently asked questions from clients on this page.

What should I know about contract disputes?

California contract law is the body of law that governs the formation, interpretation, and enforcement of contracts in the state of California. Under California law, a contract is a legally enforceable agreement between two or more parties that creates obligations that the parties are required to fulfill.

To be enforceable, a contract must meet certain requirements, including:

  • Offer and acceptance: There must be a clear offer by one party and an acceptance by the other party.
  • Consideration: Both parties must receive something of value in exchange for their promises.
  • Capacity: Both parties must be legally capable of entering into a contract (e.g., they must be of legal age and of sound mind).
  • Legality: The purpose of the contract must be legal and not against public policy.

If a contract is found to be enforceable, the parties are required to fulfill their obligations under the terms of the contract. If one party breaches the contract, the other party may be entitled to damages for any losses that result from the breach.

California contract law is complex and can be difficult to navigate without the assistance of an experienced contract lawyer. If you are involved in a dispute over a contract or are considering entering into a contract, it is important to consult with a lawyer who can advise you on your legal rights and options.

What does the law consider fraud?

In California, fraud is a type of intentional deception that is committed for the purpose of causing financial or other harm to another party. To prove fraud in California, the plaintiff must be able to show that the defendant made a false representation of a material fact with the intent to deceive the plaintiff and that the plaintiff relied on the representation to their detriment.

There are several types of conduct that may be considered fraud under California law, including:

  1. Misrepresentation: Making a false statement about a material fact, with the intent to deceive the plaintiff.
  2. Concealment: Hiding or failing to disclose a material fact, with the intent to deceive the plaintiff.
  3. False promise: Making a promise with no intention of performing it, with the intent to deceive the plaintiff.
  4. Misleading conduct: Engaging in conduct that is likely to mislead or deceive the plaintiff, with the intent to deceive the plaintiff.

If the plaintiff is able to prove fraud, they may be entitled to damages for any losses or harm that they suffered as a result of the fraud. An experienced fraud lawyer can help a plaintiff understand their legal rights and options and can assist them in seeking appropriate damages for the defendant’s conduct.

Can I get punitive damages in my case?

It depends on the specific circumstances of your case. In California, punitive damages are a type of damage that may be awarded in a civil lawsuit to punish the defendant for particularly egregious conduct and to deter similar conduct in the future. Punitive damages are generally not available in every case and are only awarded in cases where the defendant’s conduct was particularly malicious, fraudulent, or oppressive.

To be eligible for punitive damages, the plaintiff must be able to show that the defendant acted with malice, oppression, fraud, or a conscious disregard for the rights of the plaintiff. This means that the defendant must have acted with the intent to cause harm or with a conscious disregard for the plaintiff’s rights.

If the plaintiff is able to prove that the defendant’s conduct was sufficiently egregious to warrant the award of punitive damages, the court may award an amount of punitive damages that is designed to punish the defendant and to deter similar conduct in the future. The amount of punitive damages that may be awarded is limited by California law, and the court has discretion to determine the appropriate amount based on the specific circumstances of the case.

Is my personal property at risk if my business is sued?

If your business is a corporation or limited liability company (LLC), your personal assets are likely protected from business lawsuits. However, there are exceptions if you:

  • Personally guaranteed a business debt
  • Engaged in fraudulent or illegal activities
  • Commingled personal and business finances

Since each financial situation is unique and not treated equally, you are better off
maintaining proper business and personal financial records separately to help maintain this protection.

Are verbal agreements binding in California?

Verbal agreements can be legally binding in California. However, proving the existence and terms of a verbal agreement can be challenging. For a verbal contract to be enforceable, you must demonstrate that:

  • An offer was made.
  • The offer was accepted.
  • There was a mutual understanding of the terms.
  • Something of value was exchanged.

Some contracts must be in writing under California’s Statute of Frauds, including
agreements that require more than a year to complete, real estate sales and agreements to
pay someone else’s debts. While verbal agreements can be binding, it is always advisable to have important business agreements in writing.

What can I do if another company interferes with my business relations?

If another company intentionally interferes with your business relationships or contracts,
you may have a claim for tortious interference. This can include:

  • Intentionally causing a third party to breach a contract with you
  • Disrupting an existing business relationship
  • Preventing a potential business relationship from forming

To succeed on such a claim, you generally need to prove:

  • You had a valid contract or business relationship.
  • The interfering party knew about this relationship.
  • They intentionally acted to disrupt it.
  • You experienced financial loss as a consequence.

These cases can be complex, so it is important to document any interference.

Can a contract be illegal? What makes a contract illegal in California?

A contract can be illegal and thus unenforceable in California if:

  • Its object or purpose is unlawful.
  • It violates public policy.
  • It requires the performance of an unlawful act.

Examples of illegal contracts include those for illegal goods or services, agreements that
violate antitrust laws, contracts that discriminate against protected classes and usurious
loan agreements that exceed California’s maximum interest rates.

What do I need to prove to succeed on a breach of contract claim in California?

To prevail in a breach of contract claim in California, you need to establish four elements:

  • Existence of a valid contract
  • Your performance or excuse for nonperformance
  • The other party’s breach
  • Resulting damages

The specific requirements can vary depending on the contract’s nature and the breach’s
circumstances.

What do I need to prove if I want a breach of contract claim to succeed?

You need to prove that you had a valid contract in the first place and that you either upheld your end of the bargain or there was a valid reason for your nonperformance (likely related to the other party’s breach). You must also show that the other party failed to uphold their obligation under the contract and that, as a result, you suffered a measurable injury (damages).

What relief am I entitled to in the event of a breach of contract?

The exact remedy for your situation may vary according to the nature of your contract and the nature of your losses. Your contract may specify or limit the damages to which you are entitled, so that’s one place to start. Remedies can generally include compensatory damages (financial compensation), specific performance (where the other party is required to fulfill the contract after all), injunction, rescission (which cancels the contract and aims to restore each party to their precontractual positions) and nominal damages.

What does a contract need to contain to be legally binding?

Contracts can theoretically be created through verbal and written agreements or even by performance. To be legally binding, a contract must include:

  • An offer from one party to the other
  • Acceptance of the terms by the other party
  • Consideration, or something of value that is bargained for as part of the exchange
  • Mutual intent and agreement, coupled with the legal capacity to make that bargain

A contract must also not be for an unlawful purpose, violate public policy or require an unlawful act to be enforceable.

What are some of the most common duties imposed on franchisors under franchise agreements?

Broadly, most franchise agreements require franchisors to provide initial training, ongoing support, advice on setup and operations, and support in marketing campaigns and operational processes. Your contract with a franchisor will specify what support and services you can expect.

Are franchisors permitted to modify their requirements or system standards during the term of the franchise?

Franchisors enjoy more latitude to change their obligations to the franchisees than you might expect. A lot depends upon the specific language of your contract, which is why it is so important to incorporate fluidity into your agreements. An experienced attorney can help review a franchise agreement and negotiate the terms of the agreement to give you that latitude.

Is it permissible for franchisors to restrict or limit the other businesses in which their franchisees might participate?

It is permissible for franchisors to restrict franchisees from engaging in other enterprises, especially those that might compete with the franchise.

Discuss More Questions With A San Diego Business Dispute Attorney

You deserve even more answers in a personal consultation with our lawyers. Please contact Golshani Lee LLP at 858-724-7908 or send us an email to set up an initial consultation today. Our attorneys speak Farsi and Korean.