What Is the Unfinished Business Doctrine for the Acquiror of a Business?

Last week in this series, we broke down how to handle credits and accounts receivable when structuring an asset purchase agreement. That piece mentioned something that deserves a closer look: the unfinished business doctrine.

Most businesses still have work in motion at the time of sale. Projects are midstream, invoices are building, and clients are still expecting delivery. If your agreement doesn’t address how to divide those earnings, you risk misunderstandings over revenue that lands after the closing date.

This guide walks through what the unfinished business doctrine means, when it applies, and how to protect yourself.

Understanding the Context of the Unfinished Business Doctrine in an Asset Sale

Let’s say you acquire a service-based business with contracts already in motion. The seller’s team built the foundation, and you’re stepping in to finish the job. In your first few months, checks start arriving. But the truth is, you only delivered the last 20%.

The revenue reflects work that predates your initial agreement, and if your asset purchase agreement doesn’t address that gap, you’re now in gray territory. That’s where the unfinished business doctrine enters the picture. Some courts have used it to allocate post-closing income tied to ongoing obligations.

What Is the Unfinished Business Doctrine?

The unfinished business doctrine is a legal principle rooted in partnership law. It traces back to a 1984 California case, Jewel v. Boxer, where two law partners dissolved their firm and continued working on matters they had started together. The court ruled that profits from those matters still belonged to the old partnership, not the individual partners who finished the work.

That ruling created a framework that some courts still rely on when deciding who’s entitled to income from work that wasn’t completed before a transition. Over time, the doctrine has evolved, and its application now varies depending on the jurisdiction.

So how does a doctrine built for partnerships show up in an asset purchase?

If your asset purchase agreement doesn’t include language covering unfinished work or partial performance, and a dispute arises, the court may look to the unfinished business doctrine for guidance. That means profits from projects that started before the closing date could be tied to the seller — even if you delivered part of the work. The only way to avoid this risk is to address it upfront in the purchase agreement and confirm how income will be handled for any in-progress work that spans both sides of the deal.

How to Draft Around the Unfinished Business Risk in Your Asset Purchase Agreement

A well-drafted clause should spell out exactly how open contracts will be handled, who completes them, and how the profit is split between the buyer and seller. The key points to lock down are:

• Which party is responsible for completing each open engagement, contract, or deliverable
• Who is entitled to collect the revenue tied to that work
• How that entitlement is calculated based on effort before versus after the closing date

Not every deal allows for a clean division of responsibilities. Some projects may rely on the seller’s key employees, involve processes that cannot be handed off in a single day, or carry regulatory and licensing constraints that require the seller’s continued involvement.

In those situations, a transition services agreement can keep the deal moving. It’s a short-term contract in which the seller agrees to provide specific services after closing for a fixed fee or reimbursement. This approach gives both the buyer and seller breathing room to finish in-progress work without triggering post-closing disputes.

Final Thoughts

Unfinished business can create costly post-closing disputes if your asset purchase agreement is silent on how profits from work in progress are handled. A business lawyer can help you anticipate this risk and draft clear language on revenue allocation.

In the next article, we will address whether the agreement should list accounts payable to vendors and prepaid vendor amounts for goods or services the buyer will receive after the closing date.

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.®

FAQ

What Counts as “Unfinished Business” in an Asset Sale?

Unfinished business typically includes any open contracts, projects, or obligations that began before the closing date but were not fully completed.

Can I Just Include a General Clause That All Revenue After the Closing Date Belongs to the Buyer?

A broad clause like that may not hold up if the seller did most of the work before the sale. Courts may still apply the unfinished business doctrine, especially if the purchase agreement lacks language tying revenue to performance timelines.

How Do I Know if My Deal Is at Risk of Post-Closing Disputes Over Unfinished Work?

If the business has active service agreements, milestone-based payments, or ongoing customer relationships at the time of sale, you should treat this as a red flag. These are prime triggers for unfinished business disputes.

Should the Asset Purchase Agreement List Each Unfinished Contract?

Ideally, yes, or at least reference a schedule that lists them. This supports your due diligence checklist and gives both parties a shared understanding of what’s “in process” at the time of closing.

What Happens if Key Employees From the Seller’s Team Are Needed to Complete the Work?

You may need a transition services agreement. This short-term contract ensures the seller continues delivering specific services post-closing, protecting the deal and keeping the buyer compliant with any service or regulatory requirements.