Does Your Asset Purchase Agreement List the Contracts That Will Be Assigned to the Buyer?

Welcome to the first installment of our new series for business owners: What’s Missing from Your Asset Purchase Agreement? Each article answers one question that could make the difference between a clean deal and a costly mess. We aim to equip you with the insight to catch what others overlook before it creates real-world problems.

Today’s question: Does your asset purchase agreement list the contracts the buyer is supposed to get?

If you’re buying a business or selling one, you might assume things like vendor deals, customer agreements, or supplier contracts automatically come with it. But they don’t. And if your agreement doesn’t spell them out, or if you don’t get the right approvals, the buyer could walk away with the business but not the legal right to use its deals.

What Are Assigned Contracts, and Why Do They Matter?

When you buy a business, or even just a business line, you are not simply buying equipment, inventory, or brand assets. You are buying the business’s ability to operate, generate revenue, and meet its obligations. And that ability is often built on contracts.

These are the agreements that keep the business running day-to-day. In an asset purchase agreement, they are known as assigned contracts. Some examples include:

• A lease for the physical space
• An exclusive supply agreement with a key vendor
• Long-term customer contracts
• Software licenses essential to operations

In many cases, these contracts are the core of the value. But you can only assign a contract if the contract allows it, and if the law does too.

What Keeps a Contract From Being Transferred in an Asset Deal?

Unless a contract is legally assignable and properly listed in the asset purchase agreement, it stays behind. In some cases, a contract simply cannot be assigned at all. There are three common barriers that can prevent a contract from transferring to the buyer:

• Contractual restrictions (anti-assignment clauses): This is the most common. Many contracts include language that blocks assignment without the other party’s written consent.
  
  
• Legal restrictions (laws or regulations): Some contracts are unassignable by law. For example, government contracts often require agency approval. Licenses and permits (like a liquor license or health permit) are usually personal to the holder. Franchise agreements often include strict transfer conditions from the franchisor.
  
  
• Personal or relationship-based contracts: Other contracts are considered personal, even without saying so. If a contract is based on trust or expertise, like a consulting deal with a specific individual, it may not be assignable because it was never meant to outlive that relationship.

Who Gets the Job of Getting Consents?

Once you realize that some business contracts can’t be assigned without approval, the next question is: Who handles those approvals? From the seller’s side, you may have the relationships and leverage to ask for that consent, but you're also trying to exit cleanly. The buyer, on the other hand, cares deeply about the outcome but doesn’t yet own the business or have standing to make the request directly.

So, who does what?

A well-drafted asset purchase agreement usually includes a clause stating that both parties must use commercially reasonable efforts to obtain any third-party consents required for assigning business contracts. This clause sets the tone for cooperation, but it’s just the start.

The agreement should also address key logistics: Who pays for any consent-related legal or administrative costs? Who covers fees if the other party demands payment in exchange for their approval?

Beyond costs, timing matters. A smart purchase agreement will make it clear whether certain consents are a condition to closing, whether there’s a hard deadline for obtaining them, and what happens if they don’t come through in time. The agreement should clarify responsibilities so both the buyer and seller know exactly who does what before the ink is dry.

What Happens if You Can’t Get Consent in Time?

A robust asset purchase agreement should also spell out what happens if that consent doesn’t come through before closing.

In some cases, the cleanest solution is to carve out the contract from the list of purchased assets. The buyer proceeds without it. This may be acceptable if the contract is not central to the business’s daily operations, the buyer agrees to its exclusion, and the purchase price reflects the omission. But this isn’t always an option, especially when the missing contract ties to a major revenue stream, critical supplier, or leased facility.

When a contract is too important to walk away from, the parties can create a temporary economic equivalence arrangement. In this setup, the seller holds the contract in trust. The buyer steps in to perform the work or receive the services. The parties agree in writing on who invoices, who delivers, who carries risk, and how money flows, often through pass-through payments or subcontracts. This allows the business to keep operating while consent is still pending and gives both sides a way to preserve value without delaying the asset sale.

Final Words

To sum it up, your asset purchase agreement should list the assigned contracts you want to transfer, flag which ones need third-party consents, and lay out what happens if consent cannot be secured before closing. The agreement should also define whether a contract becomes an excluded asset, how any economic equivalence arrangements will work, and whether the purchase price reflects the risk of missing key business contracts.

Join us next time for the next article in series, where we answer another question for business owners: "Does Your Asset Purchase Agreement List the Specific Tangible Personal Property That Will Be Transferred?"

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

At Wilkinson Law, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®

FAQs

What Happens if the Seller Promises to Assign a Contract but Fails to Get Consent?

That depends on how the asset purchase agreement is written. If the contract was listed as a condition to closing, the buyer may walk away or demand a price adjustment. If it was not a condition, the buyer may have limited remedies. This is why clarity in drafting matters.

Can a Contract Be Assigned Without Consent if the Agreement Is Silent?

Not always. Many contracts include “no assignment without consent” clauses, but even if they don’t, some courts infer that certain contracts are too personal to assign.

Is There a Risk in Operating Under a Contract Before Consent Is Obtained?

Yes. If the other party objects, the buyer could be shut out or even sued for unauthorized performance. That’s why many buyers use temporary “economic equivalence” setups to stay protected while awaiting third-party consents.