If a business is sold and it has contracts with distributors, do these contracts transfer to the new owner?

As a distributor or services to the hotel industry, we deal with a lot of sold properties that try to cancel current contracts. Are those contracts with past owners, or sold with the hotel as an asset?

Asked on December 9, 2011 under Business Law, New Mexico

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Unfortunately, the answer is, "it depends."

1) If the business structure--the corporation or limited liability company (LLC)--is what is purchased, then the new owner is still bound by the agreements or contracts, since the entity those contracts are with still exists and is functioning; the entity is the same, but simply has new owners.

2) If only the hotel's assets--including physical property, good will, trademarks or names or intellectual property, accounts receivable, etc.--is purchased, then the new owners would only be bound by the contracts if they voluntarily asssumed (or took over) them.

Therefore, the answer depends in large part on how the deal was structured and effectuated, and what, exactly, was purchased.


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