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I gave a deposit of $10,000 and signed an option contract with a franchisor for a franchise to open within 12 months or the contract was void. The franchisor failed to deliver and refuses to refund my deposit stating they sold that part of the company and the acquiring company was to assume all liabilities. This acquisition came after the 12 months and the acquiring company breached their purchase contract.

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It would be helpful to know the context of the merger more fully.

Generally, if it is a true merger, the successor company is subject to all of the liabilities of all of the pre-merger companies and take all of the assets of the pre-merger companies, which is generally a good thing for a plaintiff who is aggrieved by either company, and the predecessor company no longer exists.

There are other ways of structuring an acquisition, but this looks like a merger than an acquisition of the assets of another company, at first blush.

  • The acquiring company was going to assume all the liabilities and assets of the acquired company. Listed as a liability was my Option Contract. However since the Option Contract was voided at 12 months (prior to the acquisition) can this still be listed as a liability? In my mind there is no longer a legal contract and the original company would be responsible for the return of my deposit. I appreciate your response! – R Johnson Aug 16 '18 at 1:25
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    @RJohnson Liabilities aren't only contracts, they are also liabilities for breaching contracts. The structure of the acquisition largely governs if it is assignable as to a third party. – ohwilleke Aug 16 '18 at 6:49
  • Unless there was something in the agreement with you to state otherwise, it does not matter what his agreement with the purchaser was, you still have recourse against the entity you contracted with - provided it still exists. If it does not exist, you may have recourse against its assets or (via the liquidator) whoever took the profit. – davidgo Sep 14 '18 at 5:00

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