Can a person who is buying a business on contract sell that contract to another party?
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Can a person who is buying a business on contract sell that contract to another party?
My husband is buying a business on contract and would like to sell that contract to another party. In turn, the new party would be fulfilling the contract obligations and carrying on the business.
Is this legal?
Asked on April 24, 2018 under Business Law, Iowa
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Generally yes: a contract may be assigned to (assumed by) another person unless the contract itself has a "no assignments" (or "no assignments without seller's consent") clause limiting your ability to do so, which is legal.
HOWEVER, you cannot get out of your obligations to the seller by assigning the contract unless they consent to let you out of them. The person who buys from you will have to honor the contract terms, *but* if they don't, the seller can still go after you for any defaults (and you in turn can go after or sue your buyer): you remain obligated. That is because you cannot change the seller's rights without the seller's consent--including their right to seek redress or recourse for any breach of contract from you. So while you can sell the contract to another, get money from them, and sue them if they violate their agreements, you remain liable under the contract to the seller unless the seller agrees to release you from that liability, leaving you, as stated, with recourse against your own buyer.
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