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Can You Buy (or Sell) That Contract?

Are contracts a valuable asset of the business you are buying or selling? If so, you need to make sure those contacts can be transferred (or, as lawyers like to say, assigned). You should not assume the contracts can be assigned; you need to check.

Your lawyer should review each contract. (That means your lawyer should get a copy of each contract as soon as possible.) That review should happen during the due diligence period so you can call off or change the deal based on what you find.

What are you looking for? Usually a provision entitled, "Assignment." It's usually toward the end of the contract. Although, you can't rely on that; you must check the whole contract.

Some contracts have a provision prohibiting assignment. For example, government contracts, personal service agreements, and leases might have such a provision.

Other contracts have a provision allowing them to be assigned, if the other party to the contract consents to the transfer. For example, equipment and real property leases might allow for this type of assignment to give the lessor or landlord a chance to vet and approve or reject the buyer.

If the contract doesn't contain any language about whether or not it can be assigned, it probably is assignable, unless it's a personal services agreement. Your lawyer will need to check your state's case law to confirm whether a contract silent about assignability can be transferred.

This seems like a minor issue, but it's not. If you can't transfer a contract, the buyer won't get an asset it wants. That could remove much of the value from the deal. That could kill your deal.


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