Q: After leaving school I went to work for the local farrier. Over fifteen years I came up with various ideas to improve the business and when the owner decided to retire he asked me if I wanted to take over. We made a gentleman's agreement on price for equipment, materials and good will, to be paid monthly over a year. I took over the lease on the premises and set up a limited company using the same name as when it was a sole trading company, with his blessing.
Now, three months on, the former owner is saying I cannot use the name as I still owe money on the business. He also wants additional payment in lieu of jobs booked before I took over, and he claims we agreed a higher sum than we did. He says he will take me to court and prevent me from trading unless I change the name and settle the debt. Can he do this?
A: Making a verbal agreement in business is a dangerous move. If you had consulted a solicitor you would have had a written agreement drawn up and there would have been no question about what had been agreed.
A gentleman's agreement can be legally binding. The problem is proving what was agreed. If the previous owner sold you the rights to the business he cannot do anything which unlawfully interferes with the business and if he threatens to you can seek an injunction from the Courts to prevent him doing anything.
If as you say he agreed that you could carry on with the business and trade as that same business, i.e. use the name, then that is not dependent on you having made full payment for the business. Your situation is quite complex and it would be advisable for you to seek legal advice as soon as possible.
31/03/2014
Robert Williams
Partner and Complaints Handler
Partner and Head of the Civil Litigation, Personal Injury and Dispute Resolution team in Wrexham