The above situation seems like swimming with goldfish. If you have less than 50% yourself, why would you bank on someone else not being able to get more than 50%?
It was misplaced trust. That's a really easy mistake to make until you've been burned by it. I'll bet that person won't make that mistake a second time.
But better is to avoid swimming with the sharks at all. I have a wonderful horror story about a business deal I made where I was cheated out of about $5 mil. I didn't trust the party I was doing the deal with, so the contract negotiations took most of a year and the contract ended up being very thick as my attorney and I tried to anticipate and block every possible way that I could get screwed.
But we missed one rather obscure method.
That's what happens when you swim with sharks.
(Don't shed tears for me, though. I did very well through that deal -- just not as well as I should have.)
I feel like the story of the scorpion and the frog applies here. My solution is to try very, very hard not to engage with people I do not trust.
My mantra is "good people do good things, bad people do bad things". If you don't want bad things to happen to you, stay away from people you know to be bad regardless of how tempting it may be to associate with them.
Indeed. It was poor decisionmaking on my part. I was blinded by the $$. My attorney tried to warn me off of doing the deal at all. He had done his due diligence and looked into the company, and told me outright that the company was shady.
That was another thing I learned: if you respect someone's expertise enough to pay them for it, you should probably take what they have to say very seriously.
It was related to international distribution. I had negotiated royalties for international sales, but had neglected to cover the sale of the rights to sell internationally. So the company just sold the rights, of which I didn't get a piece, and the companies that bought the rights had no obligation to pay me anything.
This sounds like they sold something they never owned - i.e. "the right to sell without paying you royalty". Reminds me of the recent case where Disney tried to argue that in an acquisition, they bought only the rights, but not the obligations (royalty payments) that went with them [1]. Basically, writers were promised X% in royalty payments, but Disney argued they didn't buy that part of the contract, only the part where they now owned the works.
This is not something that should require, in any remotely sane legal system, an explicit contractual clause to prevent.
The larger context is that what they bought was my entire business, along with all rights to the intellectual property. What I got was a sale price and defined ongoing royalties for the product I formed the company to create.
They did sell something they owned. I neglected to attach a method by which I'd get compensated for them selling that particular thing.
In the mindset of cutthroat business, they legitimately won. They 100% adhered to the terms of the sale, and it's not their fault that I left a loophole they could leverage.
My attorney did say that if I wanted to, a case could be made for a lawsuit -- but it would have been expensive and wouldn't have had high odds of success. I just wanted to move on.
This whole event was my first real business success, and the mistakes I made were legion. It taught me quite a lot -- including that I won't do business with anyone that I am nervous about doing business with. Contracts can only protect you so much.
Also, I feel the need to repeat... I did pretty well from this deal. I was angry when this happened, but with the passage of time, I see that even with this event, I came out of the deal better than I went into it. So I hesitate to even call it a "regret". It's more of a "learning experience".
