Contract Law - An Oral Buy Sell Agreement Is Upheld

The case captioned, Prignano v. Prignano, 2-09-0439, (Illinois Appellate Court, Second District) is significant in that it recognizes a vague oral buy-sell agreement between two brothers, one of whom had passed away.

George and Louis Prignano owned several businesses together. At some point they appear to have agreed the upon the death of either of them, the survivor would buy out the other's share of the business from his heirs, using the proceeds from three life insurance policies purchased for that purpose.

The brothers discussed the arrangement, purchased the insurance, but never formalized it with a written contract signed by both of them. The case is significant because George's widow, Nancy Prignano, met the burden of proving the existence of the agreement with testimony of third parties, the insurance policies and the draft buy-sell agreement. The Appellate Court affirmed a verdict in Ms. Prignano's favor, which essentially enforced the oral agreement. Louis obtained the entire business and George's widow, Nancy, obtained the insurance proceeds.

Comment: this case again shows the importance of documenting business relationships. All too often the undersigned learns of an "agreement" between two partners that was never documented. The agreement is often very difficult to prove up at a later date. Usually unsigned documents are not worth the paper they were printed on. The buy-sell area of the law is one in which timely legal advice is invaluable. Those who try to do it themselves inevitably suffer.