Equitable Law (Mr. Dan Johnson) was recently asked (on a bulleting board) :-
Can anyone offer some guidance on this query:
1) The buyer of a company has discovered that the seller took confidential information in respect of key suppliers prior to completion.
2) This suggests that the seller will breach their restrictive covenants.
3) There is nothing in the contract saying this, but can the buyer withhold monies owed post completion for the company if the buyer has evidence that the seller is in breach of confidentiality and non-compete obligations?
Dan Johnson replied:-
This falls squarely into the realm of 'possession is nine-tenths of the law'.
The buyer should withhold cash and 'force' the seller in writing to acknowledge their historic breach and obtain a written undertaking from the seller to destroy confidential information and observe their obligations in the future.
If the seller doesn't - this is likely to strengthen the case for an injunction - but provides a counter-claim (of likely estimated losses from breach of confidentiality) to any claim by the seller to unpaid consideration.
Plenty of other steps to potentially take with the written undertaking(s) - whether or not signed (!) but you'd need to buy me lunch for this 'grey beard's' experience in such matters.
Let me know if you would appreciate my input (I've seen it before!) = As was once said of me in an appraisal - "You undertake non-contentious work in a very contentious manner". "Thank you", I said!
Dan.Johnson@EquitableLaw.com
