How to Handle a Business Partner’s Breach of Contract

When your business partner breaches a contract, it can feel like you’ve been stabbed in the back. Taking the emotion out of this, the way to handle a partner’s breach of contract largely depends on the relationship between the partners, the severity of the breach, terms of the partnership agreement, and the possible options available to resolve the issue. 

Since the partnership agreement is the main source for dealing with breaches of contract, it’s critical that everything is clearly spelled out. When the agreement is too broad or ambiguous, it paves the way for a partner to shriek their responsibilities and not fulfill their role as a partner, it can lead to breaches and disputes. 

Here are some of the ways to handle the partner’s breach:

1. File a Lawsuit:  You may sue a partner who breaches the partnership agreement, regardless of whether you expel them from the partnership. A certain kind of breach, including misappropriation of partnership assets, allows you to sue the breaching partner for compensatory damages. Typically, the amount of damages will be the partner’s actual damages minus the departing partner’s investment stake in the partnership. This could be an attractive option, depending on the size of your business. 

2. Negotiate a Settlement: Under some circumstances, you may want to forge ahead with the partnership despite the partner’s breach. However, you might require some type of restitution for their breach, and a settlement is a possible way to achieve this. A negotiated settlement allows the possibility of retaining the business relationship between you and the partner. Although you may have to compromise with your partner to obtain their agreement for settlement, you can avoid the costs and time that it takes for a legal battle in court. However, you can also consider filing a lawsuit against your partner and then offer to settle based on terms favorable to you.  

3. Seek Liquidated Damages from the Partner: Some partnership agreements contain liquidated damages clauses, which provide a certain amount of monetary damages to any partner damages by another’s breach. Courts will only enforce liquidated damages when they are reasonable compared to actual or anticipated damages in partnership lawsuit cases. For instance, courts may not enforce a liquidated damages clause that provides for dissolution of the partnership and compensation to any partner in an amount less than that partner’s investment stake in the partnership. If the court deems a liquidated damages clause as invalid, they may award compensatory damages instead. The winning party must seek to enforce the judgment awarded by the court, which isn’t easy to do.

4. Expel the Partner from the Partnership: The breach could be damaging enough for you to want to expel your partner from the company and break off with them completely. However, it is significant to know whether your partnership agreement allows the expulsion of one partner or whether you must dissolve the partnership completely. 

Get Help from a New York Business Law Attorney

If your partnership agreement doesn’t explicitly say what should happen in the event of a breach or a dispute, then you should consider the assistance of a business attorney who can help with exploring your options. Or to prevent complex litigation after a breach of contract, a lawyer can help draft an agreement to avoid future problems. Get in touch with a skilled MOWK Law attorney right away to get started.

Understanding Misrepresentation in New York Business Disputes

Before committing to a contract or deal with another company, you likely want to protect your New York business entity by preparing and negotiating. Part of the conversation may include the expectations of duties and responsibilities when it comes to contract drafting. This can take a major turn if one party is not candid about what they can deliver and perform. Misrepresentation can play a major role in your New York business dispute. Read on to learn about the various forms of misrepresentation.

What is a Misrepresentation?

Misrepresentation in its basic form is the act of providing a false or misleading account. It can come in various forms, with each having the possibility of triggering highly contentious business disputes.  

Fraudulent Misrepresentation

A typical fraudulent misrepresentation has one party making a false statement to the other party, which results in the deal or agreement between the parties to be based on an untruth, or false premise. This means that the contract would be invalid if the falsehood has a material effect on the agreement. For instance, you only agree to make a deal for a company to be your café’s vegetable supplier because they have assured you that the produce is organic. Later, you learn that the company rep lied, and the vegetables aren’t organic.  

The fraudulent misrepresentation can be made via something that the party said to the other, wrote to the other, or can even be through nonverbal action such as a gesture; silence can even be considered as a misrepresentation. 

What Do You Have to Prove for Fraudulent Misrepresentation?

In order to prevail, a plaintiff must show the following:

  • That the false representation was made 
  • That the representation was known to be false at the time it was made or that it was made recklessly without knowledge of its truth
  • That the representation was made with the intention that the other party would rely on it
  • The other party did in fact rely on the representation 
  • That the plaintiff suffered damages as a result of the reliance on the representation

Negligent Misrepresentation

Negligent misrepresentation occurs when an individual makes a statement or issues a certificate, with knowledge that this is necessary for a specific aim. The individual also knows that others are relying on the accuracy of the statement (to their detriment) and then the individual fails to take reasonable care to ensure that the statement is accurate, causing harm to the others.  

This differs from a fraudulent misrepresentation in that, it does not require proving malicious intent. Rather, the plaintiff needs to show the following:

  • That the other party was aware that the statement was going to be used for a particular purpose
  • Some conduct by the wrongdoer linking them to the plaintiff and some showing that they knew about the reliance 
  • The wrongdoer’s statements exaggerated or misstated facts
  • That the misstatements resulted from the wrongdoer’s negligence and/or lack of due diligence 
  • That the plaintiff relied on the misstatements
  • That the plaintiff suffered damages as a result

Innocent Misrepresentation

This occurs by a mistake when a party makes a false statement, but they believe that the information that they have given is accurate and true. 

Talk to a New York Attorney about Misrepresentations
When business dealings are impacted by allegations of misrepresentations, all the affected parties may wonder about what to do to protect their interest. This is when it makes sense to turn to an experienced business law attorney. You can depend on the expertise of a MOWK Law attorney who can assess your situation and provide viable options, regardless of the type of misrepresentation involved. Get in contact with us today.

MOWK Can Help With Your SBA Loans

The SBA Loan Program offers loans to help small businesses. While the loans are guaranteed by the U.S. Small Business Administration, they are issued by a traditional lender, such as a bank. These loans can offer more flexibility and lower interest rates compared to other lending options, making them a good way to help finance your business. However, they require very different procedures than what is expected in a traditional loan or mortgage. This is where you can gain insight and assistance from a MOWK Law attorney who is well acquainted with SBA loans. Read on to learn about the SBA program, and how our attorneys can help borrowers navigate the process.

What is the SBA Loan Program?

The SBA loan program is a government small business loan that isn’t funded directly by the Small Business Administration, but it is backed by the federal government and issued by a private lender. 

A borrower applies for an SBA loan through a lending institution, such as a bank or credit union. Next, that lender applies to the SBA for a loan guarantee. This means that the SBA will repay a part of the loan if the business defaults on payments. Additionally, the Small Business Administration requires an unconditional personal guarantee from everyone with at least 20% ownership in the company. This puts you and your assets up for grabs for payment if your business can’t make them.  

Why Hire a Lawyer for the SBA Loan Process?

When you’re preoccupied with the daily demands of running your business, it is difficult to navigate the loan process. A good way for borrowers to have a positive loan experience is by working with a knowledgeable commercial attorney. Not only can you benefit from a successful outcome, but you can also benefit from a lawyer’s guidance at different phases and to assist with various tasks, including:

  • Loan Requirements and Qualifications: There are various types of SBA loans – each with its own terms and requirements. The kind of loan that works best for is determined by what you want to use the money for. This is where our Mowk Law attorneys can help; they can match you up with loan that is most appropriate for your particular situation. 
  • Due Diligence Issues: Part of the process includes providing necessary due diligence to the lender. You want to ensure that you’re meeting all of the requirements and consulting with an attorney can help with this. For example, they can provide insight about the appropriate entities to form and can draft accompanying documents such as operating agreements and leases. In general, your lawyer can inform you of all the details of your transactions, including your rights, responsibilities, and risks.   
  • Loan Closing: It can be beneficial when a borrower is represented by a lawyer when the closing actually occurs. They can review the loan documents and go over them with the borrower and provide copies of all executed transactional documents required by the lender from the closing.  

Talk to an Experienced Lawyer about SBA Loans

It can be challenging to navigate the SBA loan process. However, you don’t want to lose valuable time to apply and then receive these significant funds to help operate your small business. You may find the process intimidating, but don’t underestimate how much a skilled lawyer can help. Our MOWK Law attorneys are ready and willing to assist you with taking advantage of your available legal options. Contact us today for more information.  

What should I know before signing a commercial lease

What Should I Know Before Signing a Commercial Lease?

Signing a commercial lease is an important part of running your business. If you’re in the early stages and need a storefront or other physical location, the standards for a proper commercial lease can be a difficult undertaking without doing your research beforehand. And fortunately, there’s more leeway for negotiating the terms of a commercial lease as opposed to a residential lease. Read on to learn about what to look for in a commercial lease in New York.

First Steps

Prior to getting to the negotiation stage, you obviously must identify your business’ needs in relation to the potential commercial space. You should have a good idea about this before you meet with the owner or the real estate agency. Describing the physical requirements of the business early can help in developing the precision of drafting a new lease. 

Features of a Commercial Lease

The rights that are generally associated with a residential lease don’t usually apply to a commercial one. That is why it’s important to know certain things about them before you commit to signing:

  • Who is the entity on the lease agreement: You should know the official party that is represented on the lease because individuals are allowed different lease terms than an LLC (limited liability company) or other business structure. LLCs may pose some risks for landlords, such as difficulties in the enforcement of breached leases for dissolved businesses and other complexities. 
  • Is subletting allowed: As a tenant, you may want to help lessen some risk by including a provision for subletting and/or sharing office space to alleviate the chance of insufficient revenue.
  • Are alterations permitted: Landlords will often include provisions concerning detailed procedures for altering the space and spelling out what superficial and fundamental changes are allowed.
  • Is an escalation rider included: This requirement provides an elevated risk to the tenant, who may be responsible for a sharp increase in rent because of the landlord’s real estate expenses or operating costs.
  • Does it include eviction and/or early termination clauses:  As a new business, the reality of economic sustainability is questionable at best. You may want to propose an early termination clause to the landlord. However, if the landlord wants a similar clause on their end, it could hurt your business. Because commercial tenants don’t enjoy the same rights as residential tenants, you need to be aware of language that makes it easier for the landlord to evict your business.
  • Will there be a personal guarantee: Many commercial leases in New York contain a Good Guy Clause (GGC). This is used in situations where the lease is in the name of a business entity, such as an LLC where the landlord requires an individual to sign a personal guarantee. Here, you can benefit from a GGC because it allows the landlord to release you from liability in case you don’t complete the lease period. It’s popular for start-up businesses.

Get Help with Your Commercial Lease, Talk to a Lawyer

The lease will be the quintessential indicator of your financial obligation and liability, so it’s important that you get things right. If you’re ready to expand to a new site for your business, contact an attorney familiar with commercial leases. Contact us today, so that one of our experienced MOWK Law attorneys can explore the best options for your business.

What Happens When You Take FMLA Leave? 

The Family Medical Leave Act (FMLA) allows you to take time off from your job to take care of your own illness or a family member’s illness or to welcome your newborn into the world by bonding with them. When an employee makes use of the FMLA, and they resume working, it can be difficult to make the transition back. However, it’s important to be mindful of possible violations of your rights upon your return. Read on to learn about your rights when you go back to your job after taking FMLA leave.

Communication Between Your Provider and Your Employer

Because the FMLA allows you to take time off to care of your own serious health condition, (in addition to caring for a family member with a serious illness or taking care of your newborn) you may wonder about your employer talking to your physician or other health care provider to verify your condition. 

Government regulations make it clear that any contact between an employer and an employee’s health care provider must comply with the Health Insurance Portability and Accountability Act (HIPAA) privacy regulations. 

Under the regulations, employers are allowed to contact an employee’s health care provider for authentication or clarification of the medical certification by using the following:

  • A health care provider
  • A human resource professional
  • A leave administrator
  • A management official

However, the regulations don’t allow the employee’s direct supervisor to contact that employee’s health care provider due to privacy concerns. The only way that an employee’s health care provider can supply health information to the employer is if the employee gives the provider written authorization to disclose. 

What Should Happen When You Return from FMLA Leave?

Coming back to work from any absence can take some getting used to and can be a difficult transition. Here are some acceptable things that may happen when you return to help you get back on track after taking the leave:

  • Meetings with supervisors and colleagues
  • Explanation of what occurred during your absence
  • Slowly getting back to taking over your duties

What Should Not Happen When You Return from FMLA Leave?

Besides the normal things that can happen upon your return, there are activities and responses that aren’t allowed under employment law. Some examples of FMLA violations that may occur include the following: 

  • Losing your benefits
  • Being put in a lower-paying position or demotion
  • Being harassed due to taking the leave
  • Experiencing retaliatory acts, including receiving a negative work performance evaluation due to taking the FMLA leave
  • Being subjected to intrusive inquires and inappropriate questions about your leave

Assert your Rights After FMLA Leave 

Regardless of the reason for taking job-protected leave, you should be able to use it knowing that you can concentrate on the issue at hand, whether it’s to bond with your newborn or to take care of your relative’s medical issue or deal with your own medical condition. If your employer interferes, be aware of the ways that you can assert your rights. An attorney familiar with employment issues can stand with you and help ensure that your rights are protected. Get in touch with a MOWK Law attorney. Contact us right away to learn more. 

Buying a Small Business in New York

After deciding to purchase a business, you will investigate specific businesses to buy. You can find them through the internet, various brokers, or via your own personal and professional connections. Once you’ve settled on a target, you will have to go through a series of actions to complete the sale. Read on to learn how to buy a small business in New York. 

Investigating the Business

You want to know that you’re getting a fair price for the business; you also want to know every facet about the business if some unknown factor could have a negative impact. Therefore, any buyer will perform due diligence before proceeding. This involves heavy investigation, including checking on tax returns, liens, leases, asset lists, permits and licenses. Looking into the employees, any violations or lawsuits should also be part of the process. 

Negotiating the Terms

This is dealt with primarily in the “term sheet” or letter of intent, which puts in writing the basic terms of the deal before the drafting and negotiating of the sale agreement. The term sheet:

  • Shows intent; it lets the seller know that you’re serious about purchasing the business. 
  • Avoids future negotiation impasses about major issues when the parties have already spent much time and money on the transaction.
  • Acts as a guide for the attorney when they draft the sales agreement.

Documentation of the Deal

These are key documents when transferring the business to the seller: 

  • Sales Agreement: Sets forth the major terms and conditions of the transaction and is often executed days or even weeks before the closing.
  • Promissory Note: Sets forth the purchase price owed, the dates for the remaining payments, interest on any outstanding payments, and makes it easier for the seller to collect from you if you default a payment.
  • Security Agreement: Seller may ask for a security interest in the assets being sold to you. Then, the seller may foreclose on the business assets in case you default on payment. 
  • Bill of Sale: Transfers ownership of the tangible assets of the business from the seller to the buyer, including furniture, supplies, inventory, equipment.

The Closing

It’s time for everything to culminate in the closing. This is the end of the process of the purchase when the parties and their attorneys come together to exchange money and property and complete the remaining documentation. Typically, the when and where of the closing is set forth in the sales agreement. It’s best if the closing goes on without incident, but there may be last-minute issues. Perhaps some closing conditions haven’t been met, or there are changes to the documents that need to be addressed, but hopefully the parties are fine with going ahead with the transaction regardless. 

Get Help with Buying a Small Business in New York

Many closings will go off without a hitch due to careful planning and willing cooperation between the parties. You will need an experienced attorney at every stage of the process when you make your small business purchase. They can help you handle barriers that arise in the due diligence process, prepare the paperwork, and deal with last-minute negotiations that occur during closing. Act in your best interest and connect with one of our skilled MOWK Law attorneys. Contact us today. 

Forming an LLC in New York

As you prepare to start a new business, you will be inundated with many things to consider and many decisions to be made. One of the most basic, but significant choices that you have to make is what type of business structure is best for your New York business. A popular choice for many is to form an LLC (limited liability company). Read on to learn about how to form an LLC in New York. 

Other Business Types

In New York, you have a couple of different options when it comes to types of business structures. Each one comes with its own sets of pros and cons. When you decide on a corporation, you are protected from the personal liability that comes from starting a sole proprietorship, which is the easiest structure to form. However, forming a corporation involves completing complex paperwork that must be submitted to the state government. An LLC combines elements of a corporation with elements of a sole proprietorship: It shields you from personal liability and contains less formalities than a corporation. For some, this is the best of both worlds, making it a popular option for small business owners. 

Steps to Take When Forming a New York LLC

Just like every state, New York has specific requirements that must be completed before an entity can become an LLC. One preliminary requirement is that the principle must be a resident of New York. Here are the next steps to forming your New York LLC:

  • Business Name: You will need to pick a business name for your LLC. The name can’t be a name already used in New York and it must contain “LLC”, “L.L.C.”, or “Limited Liability Company.”   
  • Articles of Incorporation: File Articles of Incorporation with the state and pay the required filing fee.  
  • Registered Agent: Appoint a registered agent. A registered agent (or RA, also known as an agent for process of service) is specified by the business for the purpose of receiving official legal documents, including lawsuit documents, subpoenas, wage garnishments, and other official legal documentation. 
  • Operating Agreement: Create and adopt an operating agreement for your LLC. This the key document within your company that sets up the powers, duties liabilities, rights and responsibilities of the members of the LLC to each other and to the LLC. Because it’s an internal document, you don’t have to file this with the state.
  • Publishing Requirement: Within 120 days of forming the LLC, you must publish a notice in two general circulation newspapers (one daily, one weekly) in the county where the LLC was formed.
  • License and Permit Requirements: Depending on the type of business activities, you may have to obtain license or permits from local or state governments. 

Get Help Forming your New York LLC from an Experienced Attorney

While New York doesn’t require the use of a lawyer to form an LLC, the Articles and Operating Agreement create enforceable rights and responsibilities and there are many tax considerations to contemplate. Consider using a skilled MOWK Law attorney to help you with your formation so that nothing is overlooked. We will work hard to represent your best interests. Contact us today to learn more and to get started. 

When Does a NY Contract Need to be in Writing?

Should your New York business agreement always be in writing? In general, the answer to this question is “yes.” However, there are specific rules to inform us when a type of contract must be in the written form. Read on to learn about when New York contracts are required to be in writing. 

The New York Statute of Frauds

The law that requires certain New York contracts to be in writing to be enforceable is referred to as “The Statute of Frauds.” 

There are several types of contracts that must be in writing, including the following: 

  • Any Contract that May Take More than a Year to Perform: Under the New York General Obligations Law, contracts that will take the parties more than one year to perform must be in writing. This does include employment contracts, but employment with no specific terms, (which is also known as “at will” employment) is not required to be in writing since this type of employment can be terminated at any time. 
  • The Sale or Lease of Real Estate: Under the New York General Obligations Law, any sale of real property and lease in New York that lasting longer that one year in duration must be in writing. 
  • Negotiating Services for Loan/ Real Estate Brokerage: All New York real estate transactions and transactions related to loans in New York must be in writing unless the individual providing the services is a licensed real estate broker or a New York attorney, per the New York General Obligations Law. 
  • Sale of Goods Contracts: The Statue of Frauds in New York requires all contracts in New York for the price of $500 or more to be in writing in order for the contract to be enforceable, unless there is some writing sufficient to indicate that a contract was made. To meet this requirement, there doesn’t need to be a formal long-form contract; there only needs to be some sort of writing necessary to show that there is a contract. 
  • Guaranty to Pay the Debts of Another: Under the New York General Obligations Law, any contract that assumes responsibility for the financial obligations of another individual or entity must be in writing. 

 “Promissory Estoppel” Exception

New York recognizes an exception to the writing requirement for contracts called “promissory estoppel.” Promissory estoppel will apply if the party trying to enforce an oral agreement can show all of the following elements:

  • A clear and unambiguous promise
  • Reasonable and foreseeable reliance 
  • An injury (the party must act in reliance on the promise)

Even when all of the elements for promissory estoppel are present, it will only allow an individual to avoid the writing requirement of the contract under certain conditions. This is when the failure to enforce the promise would be unconscionable, not merely unfair or unjust. Obviously, this can be a high bar to meet. 

Get Legal Help with Enforcing or Drafting your New York Contract

While the law requires only certain types of contracts must be written, in any type of business contract, you should get your contracts in writing. If you need help with drafting a contract or enforcing an oral agreement, getting in touch with a skilled legal professional is the way to go.  Contact us here at MOWK Law where an experienced attorney can work on your behalf to ensure that your interests are protected. 

the end blocks

Ending a New York Business Partnership

Most people don’t enter into a business partnership expecting it to end, but relationships can sour, problems may come to light, or even an unexpected economic downturn due to the COVID-19 pandemic can happen and necessitate dissolution. Though it sounds easy in theory, difficulties can arise if you and your partner failed to address dissolving the partnership in New York when it was formed. It’s akin to creating a prenuptial agreement before marriage – if you divorce, the prenup guides the process. If not, you start from scratch when problems already exist. 

Review All Your Business Documents

Wait to take actions that dissolve the partnership until you review all the documents related to your business. Either the partnership agreement, the Articles of Incorporation, or both may include information about how the business partnership would be dissolved. If a process is laid out, a New York business transaction attorney can review the documents and guide you through the process to ensure everything is done correctly. 

If Dissolution Isn’t Addressed in Your Partnership Agreement

If the documents offer no guidance, as often happens with informal partnerships involving spouses or family, you need to write down your intention to dissolve the partnership and send it to your business partner by certified mail to create a notification record. Though your partnership may have been informal, you want to be formal with dissolution to be on the safe side.

File Dissolution Documents and Resolve Creditor Claims

You should also file dissolution documents with New York State to notify your creditors that your business won’t take on any more debt under the partnership’s former terms. Though this isn’t mandatory, it’s prudent because as a business partnership, both partners are responsible for the partnership’s debts – any decisions made before notifying New York and creditors of dissolution obligates both partners. If you have outstanding debt or creditor claims, these must be resolved before you are free and clear.

Consider Tax Implications

It’s important you remember that, if you have them, you still need to deal with taxes owed for the year you dissolve the partnership as well as the year prior to avoid trouble with the IRS or tax offices at the local or state level. Filing annual returns or quarterly taxes will likely save you and your partners enormous headaches down the road.

New York Business Transactions Lawyer

Business partnerships form because parties believe they can achieve great things together; that’s why dissolving a partnership is generally not a pleasant experience. However, it’s important to ensure the proper steps and formalities are followed with regard to creditors and tax liabilities to avoid continued problems and stress that persists long after the partnership ends. To make sure you’re protecting yourself and completing the process thoroughly and correctly, it’s wise to speak to an experienced New York business transactions lawyer at MOWK Law before beginning the dissolution process. We will look out for your best interests and work to ensure you can confidently close the door on this chapter. Contact us today to have your questions answered and get started today.

US Patent and Trademark Office

Do I Qualify for the USPTO’s Expedited Patent Appeals Pilot Program?

Anyone who has ever dealt with the government when applying for a patent knows how slow the process can be. However, that may be changing for good. At the beginning of July this year, the United States Patent and Trademark Office (USPTO) launched a pilot program called the “Fast-Track Appeals Pilot Program” intended to fast track original design, plant, and utility patent application appeals. The program is a follow up to the Track One prioritized examination program, which successfully streamlined priority applications for both utility and plant patents. 

Goals of the New Pilot Program

The USPTO hopes the new program will advance applications more rapidly and streamline the process of ex parte appeals that take place in front of the Patent Trial and Appeal Board. The hope is that an application accepted in to the Fast-Track Program will have a decision on their appeal in no more than 6 months from the official acceptance date of their appeal into the Program. 

Guidelines Related to Program Acceptance and Length

Not everyone will be able to participate in the program. Currently to apply, an applicant must:

  • File a petition once the Patent Trial and Appeal Board issues the applicant a notice their appeal is on the docket
  • Pay a $400 petition fee

At the date the program launch, the USPTO stated the Fast Track program would run until the earlier of 500 petitions have been granted or July 2, 2021. At the end of the program, the USPTO will evaluate the results to determine whether the program should be finalized and made permanent as-is, or if additional changes are needed to make the program sufficiently successful. However, considering the success the Track One program had in a different stage of the patent application progress, it’s unlikely the program will fail and need additional work. 

New York Intellectual Property Lawyers

Anyone involved in creation of intellectual property knows the painstaking, time-consuming process and headaches involved in dealing with government agencies to get a grant of protection in the form of a trademark, copyright, or patent. Even though the process is slowly becoming streamlined, it remains to be seen if the new program implemented will be successful. Even if it is, the process is still complicated and can be confusing for someone unfamiliar with the process. For advice on the patent process, help with the application, or counsel if you find yourself dealing with an appeal of your patent application, experienced counsel can make all the difference. Contact the experienced New York intellectual property lawyers at MOWK Law today to let us answer your questions, learn more, and get started.