Assign Or Be Damned

Business owners, also would-be business owners, are aware of the importance of having any premises leases in respect of the business assigned when the business changes hands. That is, the vendor will arrange with the landlord for the business premises lease to be passed on to the purchaser. The need for that is self-evident; without premises, most businesses cannot operate.

What about contracts other than leases, for example sometimes crucial supply agreements that the vendor has in place with third-party suppliers? The facts in a recent Queensland Court of Appeal case highlight how important it is that a vendor pass on to a purchaser any benefits and liabilities of existing contracts that bind the vendor. Failure to do so could result in liability on the part of the vendor, particularly if the vendor does not meet its obligations under a fixed-term agreement where the business is no longer operated by the vendor. The purchaser is possibly also in a disadvantaged position.

Speak to us well in advance before you sell your business so that we can advise you on these and all other legal aspects of your proposal.