Legal Question in Business Law in California

I have a contract going back to 2006 with company A. In 2013 company A was purchased by company B. The contract with company A does not specify what happens to the contract if they are purchased. Does that mean that there is no legal contract with company B?


Asked on 2/11/14, 9:37 pm

4 Answers from Attorneys

There is no way to answer your question based on the limited information you provide. There are a number of issues that would have to be addressed in order to answer it. The two most important, however, are what does the contract say about assignment and delegation, and what does the agreement between A and B say about assignment and assumption of contracts. Without that information there is no way to answer the question.

Read more
Answered on 2/11/14, 10:42 pm
Anthony Roach Law Office of Anthony A. Roach

It may be assignable, but as Mr. McCormick points out, there is no way to know without reviewing the specifics.

Read more
Answered on 2/12/14, 7:13 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

I disagree with the previous answers.

First of all, the bare fact that Company A was purchased by Company B does not tell the whole story. If that's ALL that happened, Company A becomes a subsidiary of Company B, but its corporate existence continues, as does its obligation on its contracts.

When a company is acquired by another company, however, oftentimes more happens than the acquired company becoming a subsidiary of the acquirer. So, here, it is possible that Company A was merged into Company B, or perhaps both A and B were merged into a new Company C.

Finally, I can tell you for sure that corporate mergers do NOT have the effect of voiding the contracts of the merger partners! Can you imagine the chaos if that were true? Chrysler was merged into Fiat...... but that doesn't annul Chrysler's obligations to its suppliers to buy steel or upholstery fabric, or to pay its workers their UAW-contract wages.

In California, the continuing obligation on contracts after an acquisition and merger is covered by statute, and I'm reasonably sure every other state has a similar law. See Corporations Code section 1107.

Your contract may or may not be enforceable any more, but if it isn't enforceable, that's not because of the acquisition.

Read more
Answered on 2/12/14, 8:49 am
Bruce Beal Beal Business Law

Simply, contracts, assuming they are legal, are freely assignable, unless there are restrictions to same in the contract.

Read more
Answered on 2/12/14, 9:33 am


Related Questions & Answers

More Business Law questions and answers in California