Company A an INC Became Company B an llc in 2014.

Company B 18 months later brought in a contract from Company A having it signed By C

3 months later C stopped accepting Deliveries from B

1 year later B sues C on a contract from A which did not exist at the time of signing and no longer exist.

Is the contract valid the company stopped existing 18 months before signing?

Not a buyout of assets in the reverse. Just never changed the contract with the new company's information 18 months later.

They are selling old contracts for a company that no longer exists.

  • Please explain what you mean by "Company A became Company B" - they are either the same legal person or they are not. I cannot "become" you. – Dale M Nov 3 '17 at 1:37

The transaction you described "Company A became Company B" sounds like a transaction in which the company formally changed its name (which would not relieve it from its existing contracts) and changed its entity type from a corporation to a limited liability company, which would not relieve it from its existing contracts under statutes such as Colorado's "Junction Box Statute", Colorado Revised Statutes § 7-90-201, et seq., which allows entities to change entity type without interrupting their legal existence. This statute (which would be typical of jurisdictions permitting this and was a model statute for many other states) states:

(1) At the time the conversion becomes effective, the converting entity shall be converted into the resulting entity, and the resulting entity shall thereafter be subject to all of the provisions of the organic statutes.

(2) Unless otherwise agreed, the conversion of any converting entity into a resulting entity shall not be deemed to affect any obligations of the converting entity incurred prior to the conversion to the resulting entity or the personal liability of any person incurred prior to such conversion.

(3) Unless otherwise agreed or otherwise provided by the organic statutes, other than this article, the converting entity shall not be required to wind up the entity's affairs or pay obligations and distribute the entity's assets, and the conversion shall not be deemed to constitute a dissolution of the converting entity and shall constitute a continuation of the existence of the converting entity in the form of the resulting entity.

(4) The resulting entity is the same entity as the converting entity.

Colorado Revised Statutes § 7-90-202.

Nothing in your question suggests another form of transaction that would cause the new entity to be one that is not bound by the old contract.

But, the nature of the change in name and entity form is also something that would ordinarily not be easy for an outsider to determine.

If, in fact, it was a sale of substantially all assets from A to B, which would not normally result in an assumption of the contract of A by B, then several options would be available:

  1. The non-defaulting company could sue A for breach and recover the funds received for the sale of the assets. If there were no funds, it would be a fraudulent transfer and the non-defaulting company could sue B on a fraudulent transfer theory.

  2. B could be held to be a successor company to A and held liable, for example, on an alter ego theory.

  3. B's continued participation in the contract after the A to B transition could be held to be conclusive evidence of an assumption of the contract by B making it liable by its own agreement as a consequence of its actions continuing to participate in the contract.

Ultimately, however, the facts in the question are not clear enough to determine the outcome.

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