If one company buys out another, does it have to honor contracts of the company it took over?

UPDATED: Feb 6, 2014

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If one company buys out another, does it have to honor contracts of the company it took over?

This is regarding a propane contract. The company I was with was sold to another company. Now, in dead of winter with propane shortages, they want to soak me with $8 plus a gallon.

Asked on February 6, 2014 under Business Law, Indiana


Anne Brady / Law Office of Anne Brady

Answered 8 years ago | Contributor

The answer depends on the nature of the sale of the former business.  Generally, if the one company totally bought out the other company, then they have to honor the contracts of the company they bought.  However, if the sale was structured as a sale of assets only, as many of these deals are, then the buying company only bought assets, not the rest of the company including its contracts with others.

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