Ask a Lawyer - Archive

A friend was doing business with a company. That company was sold to another company under and Asset Purchase Agreement. The first company owes my friend $6,530. Neither company will pay my friend. Which one is responsible for this bill?

Assuming your friend's billing represents a valid debt without any defenses against payment, the selling company that incurred the debt in the first place would clearly be responsible. However, it is possible the purchasing company under an asset purchase could also be held liable under a successor liability theory. If the purchasing company knew about the debt, then it took subject to the debt. If it didn't know about the debt, it gets a bit murkier. Should the company have known about the debt through due diligence? Was the selling company solvent at the time of the sale? Lots of things to take into account here. The best options for your friend may be:

1. Turn the account over to a collection agency and let them run with it; or
2. Hire a lawyer to write a demand letter so that both companies take him more seriously.