If the company I work for was acquired but we have a 5 year contract with one of our vendors, what are the consequences of breaking that contract?

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If the company I work for was acquired but we have a 5 year contract with one of our vendors, what are the consequences of breaking that contract?

And how can we minimize the penalty?

Asked on May 1, 2015 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

For a definitive answer, you have to have an attorney review the specific terms of the contract with you; each contract is governed by its own language. As a general matter, if the contract requires you to purchase a certain amount of goods or services from a vendor, then if you break that contract, they can sue you for the profit (amount you'd pay less their costs) they would have gotten fro the remaining length of the contract had you not breached. If the contract only says that *if* you buy from them, here are the terms and prices, then you would be ok--a contract like that does not obligate you to make purchases.

Also, you say your company was acquired. If the company was an LLC or corporation and the LLC or corporation itself was purchased, the company (the LLC or corporation) is still bound to that contract. If, on the other hand, the LLC or corporation was not purchased, but only the assets (including name, customer list, good will, etc.) or the company was not an LLC or corporation in the first place, then the new company is not obligated to the contract, because the contract is still with the old company, not the new one that simply bought the assets of the old.


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