Tag: Boston Business Atorney

June 9, 2014   Posted by: Margarita Smirnova

BUSINESSES DEALING WITH ON LINE DEAL SITES!

At one point, sooner or later, you, as a business owner or business principal will consider offering your services on a Groupon like or an on line deal sites to promote your business and show potential customers your service.   Forbes’ article Are Daily Deal Sites Like Groupon Still Worth It? points out the wariness of the consumer.  In the article, a writer didn’t use her coupon.  She stated that customers became disillusioned by the deals and burnt from experiences.  She ended her article with a list of great advice for the buyers.  The list is great to connect with customers and figure how to make your business last.  The list below will take it a little further and list issues that businesses may deal with when working with companies that providing on line deals.  Keep in mind that the list is not exhaustive and not all companies are the same.

1.     Deals are contractual agreements.  When dealing with a corporation that offers an on line deal you will be provided with an already prepared contractual agreement that contains multiple clauses.  One of the most commonly used clauses is expiration date.  Each contract varies.  In 2012, Groupon, Inc. paid $ 8.5 million and settled a class-action lawsuit, which alleged illegal expiration dates when customers didn’t use their vouchers.  See, In re Groupon Inc. Marketing and Sales Practices Litigation, 11-MD-2238, U.S. District Court, Southern District of California. The result affected businesses that now must accept monies customers paid even after the deal, sans the discount.

When facing with on line deal like contract, this is the time to review every clause very carefully.  It is important to understand the company’s motive, which is to sell.  This means what is said is not always what is in writing.  One Boston magazine offered an on line deal to a business where the salesperson verbally offered a deal-type scenario that consisted the company would provide the deal on their website and keep 100% of proceeds from the deal while the business would provide a service to the customers who would buy the deal in exchange for the publication.  When they sent the contract to the business, it was shocking to see that no deal-type scenario was included anywhere in the contract.  In fact, the business would be solely responsible for the publication.

2.     Cancel the contract clause.  Deal-type companies retain the right to cancel the contract with the business at any time without warning or explanation.  That means whatever efforts you made to prepare your business to deal will go to waste.  They also can change a day and a time of the without being liable to you.  The contract can limit the business’s right to cancel which renders the clause illegal when one sided.

3.     Another big one is condition of approval clause.  If the business isn’t careful and signs this clause, the company can get the right to strip you of your right to condition for approval, which I think, is atrocious.  You want to see your final version of advertisement before it goes out in print or on line.

4.     Watch out for your own property rights.  One company wanted to retain rights to own and sell to third parties of businesses’ pictures or images and trademark perpetually.  This means that not only they can use your images that you’ve spent time, money and energy to obtain and belong to you, but also to sell them to whoever they please forever.

5.     Customer dissatisfaction.  All on line deal like companies contain limitation clauses in their contracts.   They also will make sure to be indemnified from further liability and the responsibility will fall almost entirely on the business.  It is important to be aware what type of liability the business will absorb.

Groupon like companies retained attorneys to draft contracts for them.  There is nothing wrong if you get help from one.

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business or any other legal questions, please contact Margarita

Call: (617)398-7482
E-mail: margarita.smirnova@gmail.com
This post is for informational and educational use only and does not create attorney-client relationship.
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October 25, 2013   Posted by: Margarita Smirnova

BUSINESSES PARTNERSHIPS ARE COMPLEX RELATIONSHIPS

 

The U.S. businesses consist of sole proprietorships or various forms of partnerships and corporations.  It’s not unheard of that solo businesses enter business ventures with other businesses.  Due to the tough economy, more and more business partners join business partnerships with each other than before to survive.  A business partnership union can be compared to a marriage.  Like in a marriage, a business partnership has a honeymoon period filled with well-meant, and perhaps, not-so-well-meant promises.  Then, there is a drudgery of ins and outs of a daily and weekly workload and activity with potential lack of communication may lead to contempt and breach of respect and/or trust.  Does it sound too familiar?  Yes.  That’s because it happens all the time.  Luckily, there are ways to prevent a fall out, and in case if it’s too late, peacefully depart.  Similarly to a good marriage, a personal responsibility and entering the business partnership with the idea that nothing in this world is permanent is the key to success.

There are many issues that can arise among partners and wreck a business partnership.  For example, a closed company shareholder dispute over under performance, a lack of sufficient capital and an increase in business expenses, a breach of fiduciary duty, among other things such as including but not limited to business debt collection and/or personal disputes.

A scenario where business partners are partnering with each other instead of hiring happens all the time.  Sharing household tasks is not an unfamiliar approach.  In short, two or more partners with different set of skills agree to make an input and be responsible for separate aspect(s) of the business.  Sometimes one partner’s particular or unique skill or service in the beginning is what brings the company to its success.  Later, someone could be hired instead of him.  At one point, one of the partners may think that hiring someone else with the same set of skills would be a cheaper alternative than to retain the original business partner leading to a rift in the relationship affecting the daily business flow.  Perhaps, communicating would have helped.

There are many issues that can arise among partners and financial outcome be at stake.  For example, a conflict may arise in a closed company shareholder dispute may arise over an under performance, a lack of sufficient capital and an increase in expenses.  That can lead to a breach of fiduciary duty, and unfulfilled promises and wreck a business flow.  In addition, a simple business debt collection suit by a creditor or personal disputes can lead to a prolonged grudge.  This is exactly what happened in one of the cases in Massachusetts.  See, Weiler v. PortfolioScope, Inc., 83 Mass. App. Ct. 216 (2013).

In Weiler, the business structure involved a complex array of partnerships among companies and individuals making separate contractual agreements and obligations.  The outcome resulted in securities regulations preempting over contractual agreements between the parties because there was a properly secured and timely perfected creditor.

Milton Weiler (Weiler), the plaintiff in this case, was a President and CEO of the PorfolioScope, the defendant.  Weiler developed a certain portfolio that became a part of PortfolioScope, Inc. (PortfolioScope).  PortfolioScope is an entity formed when formerly named Spencer Trask acquired Computer Aided Decisions (CAD) and CAD Research along with Plaintiff’s, among with Weiler’s, software.  In 2008, PortfolioScope sued iFlex Solutions, Ltd for the theft of trade PortfoliosScope’s secrets software.  The case with iFlex Solutions Ltd. settled and PortfolioScope was to receive a lump-sum payment in the amount of $10 million.  However, in 2002, Weiler resigned leading to replacing of the CEO within the company.  Through a stock option purchase and the sale agreement with PortfolioScope, Weiler, in exchange for the sale of his portion of ProtfolioScope, retained the right to five percent (5%) of its net proceeds received in connection with the iFlex Solutions, Ltd.

Plaintiff argued that PortfolioScope breached the agreement with the plaintiff to pay (5%) of the proceeds from a settlement related to a pending lawsuit between PortfolioScope and iFlex Solutions.  See, Weiler, at 218.

The main issue was whether an agreement between the plaintiff and the defendant stating that the plaintiff was entitled to 5% of defendant’s net proceeds in connection with the third party litigation gave the plaintiff a priority over a secured creditor who had a preferred his claim.  The Trial court held that the agreement gave Weiler the priority of payment and said that the defendant “was required to pay because the agreement did not mention any creditor, secured or unsecured.” See Weiler 218-223.

The Appeals Court of Massachusetts, however, disagreed with the trial court and interpreted the effect of the contract between the parties differently.  The Court said that the payment was simply one of several parts of the consideration for the sale of his stock options back to the company…  The court held that “PortfolioScope lacked authority to encumber collateral preciously securitized in favor of the creditor…”  “The resolution of priority conflicts is governed by the general rule “first in time, first in right” See Weiler 225-226.  Because the creditor did not subordinate his interest to Weiler, “Weiler was an unsecured creditor, whatever the nature of his interest in the settlement proceeds, was not superior to other creditor who had their interest secured.

Communication is crucial.  Comparisons with marriage aside, writing is a great communication tool.  While its not always perfect it can show the meaning among the parties.  A well drafted agreement between partners could divert a disaster by laying out possible creditors.  It can also minimize the possibility of misinterpretation and help to avoid losses and costly litigation.

 

Written by Margarita Smirnova, Esq.

If you have a specific question relating to your business, please contact Margarita

Call: (617)398-7482

E-mail: margarita.smirnova@gmail.com

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