Rap artists are sued over startup business

On Behalf of | Sep 7, 2018 | Contract Disputes |

In a commercial contract case sure to generate interest in the Los Angeles, California area, two famous rap artists are being sued for breach of contract related to a startup company. The case presents an example of why contracts should be in writing.

According to the lawsuit, the two rappers formed a business to distribute cannabis. The three plaintiffs are alleged investors in the company. According to the three, they each invested approximately $5 million based on the understanding that the company had a value of $50 million. They claim that the agreement gave them a 14.5 percent ownership of the business.

However, a more recent valuation has the company worth at least $170 million, more than three times than originally thought. Rather than profiting from the increased valuation, the investors claim they were “kicked to the curb.” The rap artists have denied that any such ownership agreement exists. At present, it is unclear whether the company denies receipt of the investment money or, if received, that it did not constitute an ownership interest.

Though many oral contracts are valid, they are also more difficult to prove in litigation. Rather than reliance on the four corners of a contract, proving a contract exists requires outside witnesses, actions of the parties, memos and other evidence. Even when its existence can be shown, the exact terms of the agreement must be proven in a like manner. This is true whether a business goes bad or, as in this case, the business flourishes.

Commercial law attorneys will attest that best practices compel reducing the agreement to writing with as many terms as possible contained within the document. Contracting an experienced in contracts is vital when dealing with large sums of money. Whether the contract is for hundreds of dollars or millions of dollars, a written agreement is far easier to enforce.

Source: Atlanta Black Star “,” Dr. Dre, Xzibit Sued For Breach Of Contract With Their Weed Company, Shamone Nelson, September 4, 2018.

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