So You Think You Know The Law

May 2017

True or False? If a contract states a buyer is not responsible for the liabilities of the seller, the buyer cannot be held liable for the seller’s liabilities. (FALSE) – A buyer can be liable if the buyer ignores the contract and acts contrary to the agreement, thereby creating a different agreement or successor liability. True or False? Failure to have an agreement among owners of a business, providing an unhappy owner the right to be bought out, is one of the most common causes of litigation among owners. (TRUE) – This is why it’s critical to have a legal agreement in place from day one. True or False? It is not necessary to spell out the terms of a potential sale or purchase of an ownership interest, or a procedure for determining terms, in an owners’ agreement, as long as there is a right to be bought out stated in the agreement. (FALSE) – Failure to agree on terms of a buyout and state them in an owners’ agreement or provide a procedure for determining them, may make the agreement unenforceable and will almost always result in litigation unless the parties are able to agree on terms at the time of the buyout when parties may not be as agreeable.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.