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Company A signs a contract with company B, a scrap metal vendor, to buy all of company A’s scrap metal produced. Company A sells out to new owners and changes names. Company B continues to purchase scrap metal from the new company A under the contract terms. New company A wants to change scrap vendorswhen the contact expired, but there is a 1 year auto renewal clause if Company A does not give 30 days written notice from the expiration of the contract. Since Company B did not sign any type of Novation to the new Company A’s name is the contract null and void?

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The parties to the contract have not changed; they are still the purchaser company and the scrap vendor. The obligations have not changed; they are presumably based on amounts of stock and monetary value.

The only changes are in the name of one party and its ownership, so unless the contract permits termination for those reasons (not unheard of, if a contract has been intended to provide/avert support from/by a particular party or symbolism) the contract still stands with all its terms. A novation is not needed.

  • What can Company A do to get out of the contract? – Nick Jones Mar 14 at 4:09
  • Lots of things! Give notice according to its terms, negotiate a new contract whose terms include cancellation of the existing one probably for a significant fee (i.e. buy out), breach it in such a way that cancellation is the only viable outcome, or buy the other party and use that authority to cancel it bilaterally. – Nij Mar 14 at 5:42
  • @NickJones negotiate a payout figure or other settlement – Dale M Mar 14 at 5:42
  • @NickJones adhere to the contract's bailout clauses, e.g. the 30 day notice (which can be given at any point before the 30 days are up, like right after renewal) and wait, or use any other bailout/buyout clause. In some cases, A also might declare the material formerly scrap as still being part of the material stock, thus producing no or just small amounts of scrap metal (at the cost of storing the material) and wait for the contract to end. – Trish Mar 14 at 11:04

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