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Purchased a Business - Old Contracts

 
 
Reply Mon 27 Jan, 2014 03:00 pm
I purchased an existing business under my new Tax ID and Legal Entity. Am I bound to the contracts that the previous owners signed? For example, I want to witch credit card processing companies, but the previous owners signed a 5 year contract with a $750 cancellation fee. Do I have to honor that or can I get out without incurring the $750 cancellation fee.
 
jpinMilwaukee
 
  5  
Reply Mon 27 Jan, 2014 03:01 pm
@jpinMilwaukee,
ps... Hi A2K community! It's been a long time since I poked my head back in here!
jespah
 
  1  
Reply Mon 27 Jan, 2014 04:23 pm
@jpinMilwaukee,
Holy cow! Hiya!

Huh, I bet you can dump the old contracts. Was there something specific in the purchase contract (for the business) where you agreed to take on past debts and/or obligations? 'Cause vagueness in a contract is always construed against the drafter, and if this isn't in it and you didn't draft the contract, then there's no a lot of reason why the previous owners or the processing companies could believe that you were buying the old obligations.
JPB
 
  1  
Reply Mon 27 Jan, 2014 04:24 pm
@jpinMilwaukee,
No answer, just stopping by to say hi!
jpinMilwaukee
 
  1  
Reply Mon 27 Jan, 2014 04:29 pm
@jespah,
Thanks Jespah!

The only mention of debts/obligations in the contract is this:

"Date of sale will occur on August 31, 2013 and will be effective as of 12:00 midnight on August 31, 2013. Seller is liable for costs incurred up to the end of day of closing, Buyer for costs incurred after that date."
jpinMilwaukee
 
  1  
Reply Mon 27 Jan, 2014 04:29 pm
@JPB,
Hey JPB!
0 Replies
 
jespah
 
  1  
Reply Mon 27 Jan, 2014 04:36 pm
@jpinMilwaukee,
I'm thinking these costs were incurred before the date of closing. Of course, talk to the pros; I haven't done this in ages.
ossobuco
 
  1  
Reply Mon 27 Jan, 2014 04:38 pm
@jespah,
Just listening, saying hi!
jpinMilwaukee
 
  1  
Reply Mon 27 Jan, 2014 04:52 pm
@ossobuco,
Hey osso!
0 Replies
 
parados
 
  4  
Reply Mon 27 Jan, 2014 05:31 pm
@jpinMilwaukee,
Did you buy the business or just the assets of the existing business?

This is probably going to be a question for a lawyer. If you purchased an ongoing business you probably also purchased any contracts signed by the company you now own. It's probably going to come down to which legal entity signed on for the credit card processing and whether you are now that entity.
0 Replies
 
roger
 
  1  
Reply Tue 28 Jan, 2014 06:08 pm
@jpinMilwaukee,
Hey jp!

My general understanding is that if you bought the business intact, you have both the old company's assets and liabilities. Not sure that would include old contracts. If you merely purchased their assets, you're probably clear.

Just kind of guessing, ya understand.
jpinMilwaukee
 
  1  
Reply Tue 28 Jan, 2014 06:35 pm
@roger,
Yeah I was kind of leaning that way too. Thanks for the guess!
Region Philbis
 
  1  
Reply Tue 28 Jan, 2014 06:40 pm
@jpinMilwaukee,

hey there...
panzade
 
  1  
Reply Tue 28 Jan, 2014 07:57 pm
hey ho...good to see you
ehBeth
 
  1  
Reply Tue 28 Jan, 2014 07:59 pm
@jpinMilwaukee,
Now here's an awesome sighting!

Welcome back to the hood, jpin!
Ticomaya
 
  2  
Reply Wed 29 Jan, 2014 08:26 pm
@jpinMilwaukee,
Howdy, jp!

Okay, not my area of expertise by any means. Maybe Joe from Chi Town will chime in. But, I think jes is right and you can dump the old contract. And parados has a good question, and a good point: what did you buy? Did you acquire the legal entity that entered into the contract with the cc processing company? I assume not, since you said you bought the company using a new legal entity. And so, if you did not acquire the legal entity that entered into the contract with the cc processing company, you don't have "privity of contract" with that processing company. How would that processing company be able to charge the cancellation fee? That's what I would argue. And if in the purchase contract you didn't agree to assume any contracts the prior company entered into, what recourse do they have against your company?
jpinMilwaukee
 
  1  
Reply Fri 31 Jan, 2014 05:18 pm
@Region Philbis,
Hey Region!
0 Replies
 
jpinMilwaukee
 
  1  
Reply Fri 31 Jan, 2014 05:19 pm
@panzade,
Hey Panz! Good to see you too.
0 Replies
 
jpinMilwaukee
 
  1  
Reply Fri 31 Jan, 2014 05:19 pm
@ehBeth,
Thanks ehbeth. Good to be back!
0 Replies
 
jpinMilwaukee
 
  1  
Reply Fri 31 Jan, 2014 05:20 pm
@Ticomaya,
Hey Tico!

Thanks for the answer. There was never anything specifically stated in the contract about existing contracts. I did have the CC processing company switch over to my bank account and I have been using them, but have not signed any documents or forms with them.
0 Replies
 
 

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