Is a contract that was signed with a previous company still valid and bindingif that company was bought out by another company?

UPDATED: Oct 5, 2011

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

Is a contract that was signed with a previous company still valid and bindingif that company was bought out by another company?

The contract says that it auto renews each year. Now they want me to pay a contract buy-out of $2300. We never actually signed any contract with this new company.

Asked on October 5, 2011 under Business Law, Iowa


S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

If the original company assigned the contract to the second company and assignment which is a complete transfer of interest is not prohibited in the contract, the contract is still valid. If an assignment of the contract is prohibited, it can be narrowly construed to only prohibit a delegation of duties instead of an assignment.  However, if the buy-out was not part of the original contract, then the buy-out is merely an offer which you can reject.

In order to have a valid contract, there has to be an offer and an acceptance. 

If the second company wants to amend the contract to include the buy-out provision, your consent as a signatory to the original contract is required.  The second company cannot unilaterally change the terms of the contract and enforce the contract against you.

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 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.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption