Business is sold, what happens to the contrqcts it has with its clients

Question

This is quite complex! Business group A operates as a group with 2 seperate businesses serving the same client but in 2 different ways (cleaning and security) The client wanted the business group A to provide these services and gives them a contract. Business group A then sells one of its businesses to company B What happens next? Does the business group A operate one of the businesses as well as the new company B. Or is business group A now in breach of contract because it can no longer fulfill its agreed contract? Hope this makes sense. Happy to answer any questions! I could probably mention all the companies involved but would rather not

Answer 1

If a sale is effectuated by way of transferring equity (e.g., stock) rather than an asset sale, generally, the parties to the contract, as well as the obligations under the contract, remain unchanged. In an asset sale, the issue turns on whether the sale included an assignment of the contracts and whether the general assignability of the contract was barred by an applicable legal principle or the terms of the contract itself. And, when permitted, the assignment of a contract generally does not relieve the assignor from its obligations under the contract. The foregoing is offered for the general interest of the reader. It is NOT legal advice or opinion and the comment does NOT create an attorney-client relationship.