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

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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

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 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.


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