Are agreements void if a company goes bankrupt and is bought out by another company?

UPDATED: Jan 25, 2012

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Are agreements void if a company goes bankrupt and is bought out by another company?

I purchased a VIP package with “entity 1” which was advertised as an unlimited lifetime deal. They honored and acknowledged this VIP package for over a year. Now they are saying that they went bankrupt and were bought out by entity 2- voiding all agreements. Can they do that? and what if all the advertisements and even my original receipt of the $3000 purchase for this packages contains both entity 1 and 2 names? It says entity 1’s name at entity 2 names.

Asked on January 25, 2012 under Bankruptcy Law, North Dakota


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

1) Bankruptcy can result in terminating existing contracts, so a bankruptcy could void the agreement.

2) If entity 2 bought entity 1's corporation (i.e. the shares) or LLC, then entity 2 is bound by entity 1's agreements and contracts, since it now owns the same entity (the corporation or LLC) which executed them. If entity 2 only bought the assets (e.g. good will, accounts receivable, name and intellectual property, etc.) of entity 1, however, then it would only be bound to those agreements it specifically assumed, or took over.

3) As to the issue of whether both companies are obligated on the contract--it may be the case that both entities are bound, if they were both on it; there is no way to say for sure, however, without reviewing exactly what the contract says. You should bring the documenetation with you to an attorney for review.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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