QUESTION
Does buyer of assets of fitness club have to honor assignable contract between the original owner and independent contractor trainers?
Asked on Sep 15th, 2014 on Breach of Contract - Pennsylvania
More details to this question:
Contract exists between Club A and two trainers that act as independent contractors in the club. The trainers pay a nominal rent amount, but all of their clients are required to join Club A and pay monthly membership dues. These trainers were enticed to Club A by the original owners in order to gain their clientele as members. Buyer X refuses to uphold the original contract between Club A and trainers stating that he just bought the assets. The original contract includes a clause that allows for the assignment of the contract in the event of a sale, transfer of ownership or new management. Is the buyer liable for breach? Is the original owner liable for breach?
1 ANSWER
If the buyer just bought the assets of the business, rather than the equity (e.g. stock in the corporation that operated the business), it is not (except under rare circumstances) liable on obligations it did not agree to assume. Just because the contract could have been assigned legally does not mean that it was assigned. The original owner remains obligated on the contract. Depending on the actual facts, it is possible that the buyer induced the seller to breach its contract with you and is therefore liable for tortious interference with contract (for example, when a competitor of your old employer, knowing that you are bound by a non-compete provision in your current employment agreement, hires you to work for its competing business, it may be liable for tortious interference with contract.)
Answered on Sep 15th, 2014 at 3:31 PM