QUESTION:

    Ken:

     We use your contracts and appreciate your emails.  Please advise us regarding commercial customers.

     We have a number of small, individually owned, businesses as our monitoring customers.  If the contract is in the name of the business, and the business is sold to another person, is the contract binding on the original owner who signed the contract or on the business and its new owner?  Who should we pursue in the event the business is sold and the new owner wants to go with another company?  Who is responsible for the remainder of the contract?

     We appreciate your help and advice.  Thank you.

    Lynne V. Loyola

********

ANSWER:

*********

    Your subscribers typically sell their business in one of two ways.  One, the principal sells his stock in the corporate entity, or transfers an LLC interest to another.  In this case the subscriber stays the same; it's still the business entity that originally signed your contract.  You don't need to do anything other than perform under your contract and enforce the contract should the subscriber fail to perform.

    The second way to sell a business is to sell the assets, and usually not the liability.  In this situation you have a new entity in the premises and you cannot rely upon your contract with the old entity.  You need to get a new contract signed, or you need to get the new entity to assume your contract.

    If you have a Service or Monitoring contract with the selling entity and you learn of the pending sale, it would be appropriate to notify your subscriber to remind it that there is an outstanding contract.  You can consider permitting the selling company to have the buying company assume the contract.

    If the sale takes place to a new entity you can remove your equipment if it was leased equipment.  You can and should terminate all service and monitoring unless a new contract is signed or the old one assumed.

    You can pursue the selling entity who has a contract with you if that contract goes into default.  By the way, you should not accept payment from the new entity unless a new contract is entered into or the old one assumed, in writing.