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Investment in My New Company - Contract Law Advice?

Discussion in 'Commercial Law Forum' started by varun, 6 May 2014.

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  1. varun

    varun Member

    6 May 2014
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    I recently found an investor interested in investing in my project. He is the vice chairman of a company called Four Seas Investment. I met him last week in Kuala Lumpur. I gave my presentation which he liked, and after everything we discussed how it's going to work, and then he told me after their final board meeting they will take a decision whether to invest or not.

    He said if everything goes well, I will receive a Letter of Commitment which will include all the points that we discussed. Now I have received the letter, and in that letter there is a point that I will have to pay 50% of the fees for a third party company who will come to Australia for site inspection and due diligence, etc.

    The time when I met him I told him that I can't afford to pay that amount, and he said that they can assist me. Now in that document, it says that I have to pay 50%, but it doesn't specify any time frame. Do you think if I sign it and if they decide not assist me and I couldn't pay that amount, I will get in trouble with contract law? After receiving the letter, I have emailed them twice saying I can't afford to pay that amount. and they said they would assist me in every way they can.
  2. rebeccag

    rebeccag Well-Known Member

    8 April 2014
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    G'day Varun,
    If you're not comfortable with the arrangement or can't afford it, then it doesn't sound like a good idea. If you sign a contract, then you're committed to fulfilling your end of the deal. It sounds odd that you "will have to pay 50% of the fees for a third party company who will come to Australia for site inspection and due diligence etc". Generally, if someone wants to invest, they'll make the effort with their own money and conduct their own due diligence. Its not something that I think you should be expected to contribute to.

    How did you meet the Vice Chairman of this Four Seas Investment? Have you done your due diligence on the company and the people involved? Are they to be trusted? Do they have a successful track record?

    If they're not doing the right thing by you already and something smells fishy, then go with your gut. Nothing gets better once you sign an agreement, it gets you in deeper and you're committed to each other - like a marriage!
  3. Tim W

    Tim W Lawyer

    28 April 2014
    Likes Received:
    If you don't like, or don't understand,
    what you are being asked to sign, then don't sign it.

    You probably don't realise, but you are in a complex commercial transaction
    (multiple jurisdictions, unclear choice of law, possibly multiple currencies,
    a contract that may lack clarity, and a whole load of unknowns about the interest(s)
    and/or equities you may be creating), much of which you probably don't understand.

    For example - do YOU Know if you are creating a partnership, selling shares, or simply getting a loan?

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