If I signed a contract with one taekwondo company but they sold the business to someone else, are we obligated to pay the new people?

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If I signed a contract with one taekwondo company but they sold the business to someone else, are we obligated to pay the new people?

They are using the same billing company but we have not signed a contract with these new people. The old people took all the contracts with them so they have no proof we owe other than what the billing company says. We are not sure we are happy with the new school and aren’t sure if we have to continue to stay and pay because our contract was for 18 months but not with these people. We

also owe for the previous 2 months but the previous owner said she would work with us and don’t worry about paying it just continue to bring our child to class. Now the new owner wants us to pay the previous balance and also wants us to pay more than what was agreed to in our contract with the old

owners.

Asked on February 3, 2017 under Business Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

You are most likely obligated to pay them. There are three ways a business like this could be sold:
1) If the school was an LLC or corporation ("inc.") and the new owners bought the actual LLC or corporation, then you are still obligated under the contract, since the contract was with the LLC or corporation, which still exists--it's just owned by someone new.
2) If the school was not an LLC or corporation, or it was and the new owners did not want the LLC or corporation itself, then they bought the "assets" of the school, which includes the name, logos or trademarks, physical assets, customer lists, accounts receivable and typically valuable contracts.
a) Most likely then, they took over (were  "assigned") the contracts with customers, because that's probably why they wanted this school: not for the kicking shields and punching bags and bo sticks, but for the existing customer accounts and contracts. Taking over contracts in this way is perfectly legal, and if they did, then they "step into" the "shoes" of the original school and you are now contracted with them.
b) It is *possible* that they  bought the assets without buying or taking over the contracts--they are not legally required to take the contracts when only buying the assets, but could choose to only purchase, for example, phsyical assets--but it is difficult to imagine why they would do this.
So out of the  three ways to buy a business like this, in two you are contracted to them, and only in the rare third case would you not be. You can certainly inquire into this, but the odds are that you are under contract to them, as fully as you were to the original school.
If you were under contract to them, they can require you to catch up on any past due amounts immediately; regardless of what the prior own was willing to do, they don't need to give you time.


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