Is a customer’s contract still valid if the original company that they singed with is purchased by another company?
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Is a customer’s contract still valid if the original company that they singed with is purchased by another company?
About 9 years ago I signed a contract with a gym, which years later was purchased by another gym. According to the law, does the second gym have to respect the stipulations in the contract I signed with the first or no?
Asked on September 22, 2011 under General Practice, Texas
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
This depends entirely on how the new company bought the old company.
There are basically two ways for company 1 to buy company 2.
1) Company 1 buys the business entity that is company 2--i.e. the corporation or limited liability company (LLC). When this happens, since company 2 still exists and just has a new owner, all the contracts are still in force.
2) Company does not actually buy company 2 itself, but instead buys company's 2 assets (including, e.g. it's name and intellectual property) and takes over only those contracts it chooses to take over, such as the lease. In this case, if company 2 took over the contract, it is bound by it, but otherwise not.
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