Purchase & Sale Denial of Service Legal?

[K2PNW]

Jurisdiction

Oregon

I work for a waste disposal company in Clackamas County, Oregon. A business with suspended services and the balance discharged to a third-party collections firm now has a new owner. This new owner has purchased the business name and license and is taking over the previous owner's lease.

My understanding is that when a business is purchased, the debts are included as a part of the sale unless specified in the purchase contract.

Is my assumption correct, making the new ower responsible for the outstanding debt?

Thank you!

 

[adjusterjack]

My understanding is that when a business is purchased, the debts are included as a part of the sale unless specified in the purchase contract.

I think you have that backwards.

The contract would have to specify that the new owner would be responsible for the debts.

If the contract says nothing about the debts then the new owner is buying only what is specified in the contract.

However, depending on the wording of the contract, even that might not be true. Certain wording could imply that the buyer be liable for the debts without actually saying so.

I'm guessing that the new owner is denying liability for the debt.

The question:

Do you have a copy of the purchase contract?

I thought of something else, based on when I had my rentals. Your state's public utility laws may prohibit denial of service to a new customer because of the unpaid bill of a previous customer. Check that out.

Another thing. Even if the purchase contract specified that the buyer was responsible for the debt, your company is not a party to that contract and would have to sue the original customer and get a judgment and continue collection efforts against the original customer. The original customer would then have to seek indemnification from his buyer for breach of contract.

What does your contract with your new customer say about unpaid bills of the previous customer? If the new customer didn't agree to cover the bills then you would still have no cause of action against him.

There may be other factors involved. Consult an attorney and review your options.

 

[zddoodah]

I work for a waste disposal company in Clackamas County, Oregon. A business with suspended services and the balance discharged to a third-party collections firm now has a new owner.

I think what you're saying is that your company (let's call it "WD") previously provided service to another company (let's call it "DB"). WD discontinued service to DB because of unpaid bills. WD either sold the debt to a debt collector or retained the services of the debt collector to recover the debt on WD's behalf. Also, ownership of DB has changed. Accurate?

Did WD sell the debt to the debt collector, or did WD retain the debt collector to collect on WD's behalf?

What sort of business entity is DB (e.g., corporation, LLC, etc.)?

This new owner has purchased the business name and license and is taking over the previous owner's lease.

This suggests that DB was a sole proprietorship. Correct? If so, what exactly was bought and sold? Do you have a copy of the agreement between the former and new owner of DB? What lease are you referring to?

My understanding is that when a business is purchased, the debts are included as a part of the sale unless specified in the purchase contract.

Your understanding is both overly simplistic and incorrect.

making the new ower responsible for the outstanding debt?

Whether the new owner is liable for anything depends on facts not included in your post. Please start by answering my questions.

 

[Tax Counsel]

The contract would have to specify that the new owner would be responsible for the debts.

That depends on what exactly the buyer is purchasing. If the buyer is buying the business entity as a whole (e.g. buying the share of a corporation) the debts will follow the business because the business entity is the debtor and a change in ownership of the entity doesn't change what the entity itself owes. The contract doesn't have to say anything about the debts staying with the business in that situation because state law already provides for that. On the other hand, if the buyer is buying only the assets of the business then the only debts the buyer would have to pay are those he agrees to pay or that have lien against them.