QUESTION

We signed a contract with a supplier, supplier merged with "NEWCO" few years later, we never renewed old contract. Is the contract still valid?

Asked on Dec 05th, 2013 on Business Law - New York
More details to this question:
My company (company A) were served by a supplier that provides support subscription (company B), Company C acquired company B in 2006. Until today we were served by Company C, however we never signed a new contract with Company C, we just kept on with the service and invoicing, as usual. I can't even recall that we were officially notified about the merger. We were charged annually upfront for the service, with 90 days cancelation notice. Recently we notified Company C, 83 days before renewal that we want to cancel the service.They REFUSE to accept! We only signed a contract with company B and not C, and they are constantly referring to the contract with signed with B. Is that contract even valid after a merger? Do we have the same obligations to company D as we had against C? Doesn't company D have any obligation to renew the contract or at least have our acceptance before they can act as company C after the merger?
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1 ANSWER

Appellate Practice Attorney serving New York, NY
Non-personal services contracts are generally freely assignable, unless they expressly provide otherwiswe.  Moreover, you don't indicate what the form of merger was (I understand that you probably don't know), i.e. whether C acquired B's stock, or just bought B's assets.  If the former, there was no assignment in the first place; Company C owns Company B.  Bottom line is that unless the contract is for personal services, which it doesn't seem to be, or expressly provides that it can't be assigned, it is as valid in Company C's hands as it was in Company B's. However, that doesn't mean that it is valid.  Automatic renewal clauses are looked at with some disfavor in New York and are not always enforced, especially when they are in contracts of adhesion, i.e. contracts which are not separately negotiated between parties of relatively equal bargaining power but are rather form contracts imposed by one party with superior bargaining power against the other, for example car rental agreements.  Indeed,  New York has a statute, NY  General Obligations Law Section 5-903, which makes such automatic renewals unenforceable in contracts for service, maintenance or repairs of eal or personal property.  
Answered on Dec 05th, 2013 at 12:35 PM

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