Legal Question in Business Law in California

Re: Business Liability

Did you do a Bulk Sales Notice? If you did, yes, if not, probably not. Was the company or individuals sued--Is it a corportation?

Re: Business Liability

The answer depends on your form of business organization. If a corporation, the business can be sued by the customer. If a sole proprietorship operating as a DBA (ficititious business name), the former proprietor is liable and you would file a cross-complaint for indemnity or subpoena the former owner into court.

Re: Business Liability

The customer is not a party to your contract to buy the business. Therefore, what it says has no binding effect in the customer. A contract for the sale of a business has impact only on the parties to it. The impact of this rather obvious rule is that whoever is operating the business now, as well as whoever used to operate the business, MAY be liable to the past customer. The impact of the agreement between the seller and you is only that you may be able to seek recompense from the seller if and when you have to make good to this creditor of the business.

Since you have been sued, you need to answer, respond or (in small claims) appear and defend. I'd suggest that you notify both the seller and your insurance company, if you have any coverage that might apply. Tell the seller (if it's true) that you expect to be indemnified under the contract of sale against any possible liability.

I agree with the previous answer that said you (i.e., the business you bought) are more likely to be liable if it is a corporation.

Since the agreement your are quoting speaks of "acquired assets," it sounds as though you did not pick up corporate stock or assume all the liabilities. Further, I think based on the limited facts provided, your asset-purchase transaction may not have triggered a requirement to comply with the Bulk Sales Act, part of the Commercial Code (sections 6101 et seq.) requiring someone to assure payment of liabilities in a sale-of-assets transaction. However, you should try to research this law and find out if you needed to comply!

You might want to consider protection of the bankruptcy laws if the business was closed for financial reasons in March, 2008.