When can I revoke an offer in California?
Most people, even the savviest entrepreneurs, second-guess their decisions every now and then. Especially when it involves money.
The whole you-have-to-spend-money-to-make-money adage is likely true for startups who incorporate and ultimately put a product out on the market. But an entrepreneur who agrees to buy something for his or her business, for example, may later decide it’s not the best move.
So what happens then? Is the entrepreneur committed to going through with the purchase, or is he or she just walking away? If he or she revokes the offer, is there a risk of legal action and earning a less-than stellar reputation as a business owner?
The legal ramifications usually depend on the sale. If a startup founder agrees to buy a book on investments for $20 and then revokes the offer, that’s probably not as big of a deal than if he or she had agreed to spend thousands in new office equipment.
The Uniform Commercial Code, also known as the UCC, is a large collection of legal rules regarding business activities and transactions. It was created by two legal groups — the National Conference of Commissioners on Uniform State Laws, and the American Law Institute. The UCC, at least part of which has been adopted by most states, covers leases, money transfers, bank deposits, letters of credit, investment securities, bills of ladingand sales.
Under common law, an offer is generally revocable. The state of California has adopted Article 2 of the UCC, which deals with sales. Under the UCC, an offer to purchase goods cannot be revoked if it’s past a date agreed to by both parties involved in the transaction. However, if the deal appears to be fraudulent, the entrepreneur can back out without threat of litigation, even if it’s past the deadline.
Also, if both sides agree that there was a misunderstanding of the agreement and what they were getting as a result, the the sale is moot and the problem is solved.
If you’ve agreed to purchase products or goods for your startup or business and it doesn’t feel right, you should seek the advice of an experienced corporate lawyer who can help you weigh your options and determine which direction is best for you and your company.
Each business and business entity is unique. To understand the different options and which direction will be best for your situation, you need to consult with an experienced corporate attorney. Michael Leonard, Esq., of San Diego Corporate Law, named “Best of the Bar” by the San Diego Business Journal in 2016, has the expertise to guide you through everything from forming your business, to creating buy-sell agreements, to executing contracts and anything in between. To schedule a consultation to discuss any business-related matter, please contact Mr. Leonard by visiting San Diego Corporate Law or by telephone at (858) 483-9200.