Do we have recourse if an investor backed out after a signed contract?
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Do we have recourse if an investor backed out after a signed contract?
I am working with a start-up and we had someone commit to investing a small
amount of money in the company in return for equity. A basic contract was signed
by both parties and the money was expected fairly quickly. After months of no
money, the potential investor finally backed out of the deal. The investor was
asked multiple times over the past couple of months if he was still going to
invest and repeatedly told us yes, even after given the option to back out. The
money was needed for development and put us back a few months, which greatly
hurts us as this is a new technology and needs to hit the market as quickly as
possible. What can we do? The company is based in Ohio and the investor is based
in Arkansas.
Asked on November 26, 2017 under Business Law, Pennsylvania
Answers:
S.L,. Member, California Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
You can sue the investor for breach of contract.
Damages (monetary compensation you are seeking in your lawsuit for breach of contract) may be difficult to prove with regard to development being delayed. You will need to quantify the losses from that.
Your company is the plaintiff. The investor you are suing is the defendant. A lawsuit can be filed in the state where the plaintiff resides or in the state where the defendant resides or in the state where the claim that is the subject of the lawsuit arose. For convenience purposes, it would be advisable to file your lawsuit in OH.
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