After a two-day bench trial in December 2023, a Houston judge awarded nearly $650,000 to a Houston business that had sold its assets to another corporation. The terms of the sales agreement required monthly payments on a promissory note, as well as a percentage of the corporation’s net profits for five years in exchange for a covenant not to compete.
When the buyer failed to make its monthly payments, Hayes Hunter PC sued on behalf of the seller. The buyer and its president countersued, claiming that they were excused from making further payments on the note because of promises the seller had allegedly made and broken.
To recover from the seller, the buyer had to prove that the alleged brpken promises were “material” to its purchase of the business. If a false representation was not material, or it did not cause the buyer injury, the buyer was not excused from holding up its side of the deal, and the seller was entitled to the money still owed on the purchase price, with interest.
In this case, Hayes Hunter PC attorneys Charles Clinton Hunter and Lucas J. Miller successfully argued at trial that, even if the seller had made and broken promises (it had not), those promises did not affect the buyer’s performance of the contract and payment under the note, because those promises were not “material.”
The Texas Supreme Court has outlined five factors that are “significant in determining whether a failure to perform is material,” which are:
- the extent to which the injured party will be deprived of the benefit which he reasonably expected;
- the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
- the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
- the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances; and
- the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Attorneys Hunter and Miller argued that each of those factors overwhelmingly favored their client, the seller. The judge was persuaded and awarded the seller the balance due under the note, plus interest. Further, the judge awarded the seller a portion of the buyer’s net profits for the five year period, legal fees and pre-judgment interest. In total, the judge awarded the seller approximately $644,000 from the buyer.
Hayes Hunter PC proudly continues to represent its clients in business disputes. If you or someone you know is involved in a disagreement over their business, feel free to schedule a consultation with one of our attorneys at (346) 363-0334, or fill out a contact form .
Congratulations to Charles Clinton Hunter and Lucas J. Miller on this impressive victory for their client!
