If a business is sold, is the new owner obligated to honor existing contracts?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
If a business is sold, is the new owner obligated to honor existing contracts?
I am set to graduate in 6 months. A new school took over, the original owner still works there but doesn’t own it. I was not offered a new contract with the new owners but they are making new rules that are not in my existing contract. For instance, we must be at school by 9:05 a. or we are not allowed to attend for that day. In my contract with the old owner it says we have until 9:15 am. Also, we were allowed to take a leave of absence no more than 90 days and it doesn’t count against your hours. The new rules are that we can no longer take a leave of absence. Is it legal?
Asked on August 22, 2011 Michigan
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
The main issue is *how* was the company purchased. There are two ways to buy a business, with different consequences.
If the actual business structure was bought--the corporation ("inc.") or the limited liability company ("LLC"), even if the name was later changed, the buyer is still subject to all contracts then in force; that's because he/she/it bought the entity which is subject to the contracts.
On the other hand, if the new owner did not buy the business structure, but rather bought the assets--the property, the accounts receivable, the agreements with students, the name, the intellectual property, etc.--he/she/it is only subject to those contracts which were specifically taken over by the new owner--which probably will not include employee contracts.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.