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When a business is sold do the employee contracts transfer

to the new owner or...
when a business is sold do the employee contracts transfer to the new owner or do new contracts have to be signed?
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Answered in 3 minutes by:
2/18/2017
socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39,381
Experience: Retired (mostly)
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Hello,

If:

1. The contracts are signed by an officer or manager of the business (e.g., "***** *****, CEO ABC Corporation"); and

2. The business is a separate legal entity (e.g., LLC, Inc., LLP, LP, etc.); then

3. The contracts transfer with the business.

Otherwise, the contracts must be assigned by the current owner to the new owner.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.

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Customer reply replied 9 months ago
the contracts have to be literally signed by an officer or manager?
the one in question was only signed by the employee

Some employees have "signature authority," granted to them by the corporation/company's board or officers. But, unless the contract is signed in a manner that shows the employee has authority to sign on behalf of the business entity, then yes, the contract needs to be signed by someone who actually has such authority.

Otherwise, there's a risk that a court may invalidate the contract.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.

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Customer reply replied 9 months ago
I mean there is only one signature on the contract "Covenant Not To Solicit Covenant Not To Disclose" was signed by the employee agreeing to it but not any owner or manager or other staff member.

Are you trying to enforce the covenants -- or avoid them?

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Customer reply replied 9 months ago
avoid

If the employee signed with some sort of suffix like "manager, ABC organization," or similar, then a court would probably hold the business to the contract. Otherwise, there's an excellent argument that the employee wasn't authorized to bind the business to the covenants, and so the contract would be declared invalid.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

socrateaser
socrateaser, Attorney
Category: Business Law
Satisfied Customers: 39,381
Experience: Retired (mostly)
Verified
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socrateaser
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Category: Business Law
Satisfied Customers: 39,381
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