Does Your Asset Purchase Agreement Address the Transfer of Guarantees and Warranties?

Key Takeaways for Business Owners

• Confirm early whether each warranty or guarantee can legally transfer, because many do not move automatically in an asset sale.
• Review the exact warranty terms so you understand coverage limits, transfer rules, and any maintenance or account-based requirements.
• Collect all supporting documents so the buyer can actually use the warranty after closing.
• Define the seller’s post-closing cooperation in the agreement to avoid disputes over forms, vendor contact, or re-registration steps.
• Identify which warranties will not transfer and evaluate whether those gaps require a price adjustment or added protections in the agreement.

Welcome back to “What’s Missing From Your Asset Purchase Agreement,” our series for business owners who want a clearer understanding of the details that shape an asset purchase. In our last article, we looked at inventory: how to identify what belongs in the sale and how to handle items stored offsite.

This installment turns to a different issue. Many business owners assume warranties or guarantees move automatically when assets change hands. Often they do not. A warranty tied to a piece of equipment, software, or a service contract may stay with the original owner unless the manufacturer or vendor approves the transfer. That means the asset purchase agreement must define what the buyer will receive and what protections stay with the seller.

Why Warranties Matter More Than Most Business Owners Realize

A warranty is a set of rights created by a manufacturer or service provider. It describes what the original owner can request if a product fails or needs repair. Some warranties give access to replacement parts or scheduled maintenance. Others apply only if specific service records exist or if the asset remains within the original owner’s business. A few expire as soon as the asset is transferred.

For a buyer, these details affect the cost of operating the business after closing. If the warranty cannot transfer, an asset that appears valuable can create unexpected expenses. This changes the buyer’s understanding of the purchase and the condition of the business.

For a seller, unclear warranty terms can lead to disputes. A buyer may try to rely on protections the manufacturer never extended to new owners. The seller may then face questions about what was promised, what was omitted from disclosures, and whether the buyer understood the limits. Clear agreement language avoids these situations. It sets expectations for both sides and reduces the risk of misunderstandings once the sale is complete.

What Sellers Should Address Before Selling

Before selling, you should take a close look at the warranties and guarantees connected to the assets you plan to transfer. A business attorney can help you organize this information and make sure it aligns with the representations you plan to make in the agreement.

Create a Complete Inventory of Covered Assets

Start with a working list of assets that carry any form of warranty. This may include software, equipment, vehicles, operational systems, or service arrangements with ongoing vendor obligations. This list should be in place before you prepare disclosures or negotiate the terms of your representations.

Check the Terms Carefully

Every warranty is different. Review transfer limits, remaining coverage, usage restrictions, required documentation, prior repairs, and any links to your business accounts. The goal is accuracy. Your attorney can help you ensure no statement in the agreement exceeds what the warranty actually provides.

Determine the Transfer Path

Some warranties transfer easily. Others require the manufacturer’s permission or a formal re-registration. A few cannot transfer at all. Knowing this in advance helps you avoid committing to something that is not possible.

Organize the Supporting Documents

Buyers need the records that make the warranty enforceable. Proof of purchase, installation information, maintenance logs, service receipts, and registration documents should be ready for review during due diligence.

Evaluate your post-closing role

Many warranty transfers require action after the sale. You may need to submit a request to the manufacturer, confirm ownership changes, or share records the buyer cannot obtain elsewhere. Make sure the agreement defines the extent of your cooperation so you do not take on open-ended obligations.

State what will not transfer

Some protections will remain tied to your business. Software licenses linked to your account, vendor contracts that forbid assignment, and warranties requiring an ongoing business relationship should be disclosed. This protects you from disputes and helps the buyer understand the asset’s actual value.

What Buyers Should Address Before Signing

As a buyer, you should understand what warranty protection you will receive and how it affects the assets you intend to purchase. The agreement allocates risk between you and the seller, so clarity at this stage is essential.

Identify Which Assets Carry Meaningful Protections

Ask for a list of assets with coverage. You do not need a catalog of every minor item, but you should review warranties that affect expensive or operationally important assets such as equipment, vehicles, or business software.

Review the Documents That Support the Warranty

A warranty without proof of purchase or service history may be difficult to enforce. Review the records the seller provides and confirm that the asset remains eligible for service.

Understand the Terms That Will Apply to You

Look at the transfer rules, remaining coverage, and any conditions you will be expected to meet after closing. Some warranties require re-registration. Others apply only if the original maintenance schedule continues. These details matter once you assume ownership.

Confirm That the Warranty Can Legally Move to You

Some warranties are transferable only with the manufacturer’s approval. Others never transfer. You should know where each warranty stands before you evaluate the purchase price or rely on statements in the agreement.

Check What the Seller Must Do To Complete the Transfer

If the manufacturer requires action from the seller, this should appear in the agreement. You should know what cooperation you can expect and how long it will last.

Note the Protections That Will Not Come With the Assets

Some warranties will stay with the seller. Others will end when the business changes hands. Understanding these limits helps you assess the value of the asset and whether you need additional protections in the agreement.

Assess Whether Warranty Gaps Change Your View of the Deal

If a significant warranty cannot transfer, consider whether the asset is worth the proposed price or whether other contractual protections are needed. This is part of due diligence and should be addressed before negotiating the final terms.

Final Words

Warranties and guarantees influence the real value of an asset purchase. When the agreement is clear about which protections move to the buyer and which stay with the seller, the transaction becomes more predictable for both sides. This reduces the chance of disputes and gives each party a clear picture of what the business will look like after closing.

If you found this discussion helpful, the next article in our series will clarify another point that deserves attention in an asset purchase: the transfer of books and records. We will cover what should be included, what sellers often forget to hand over, and how buyers can avoid gaps that slow down operations once the deal closes.

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

Do warranties usually transfer when business assets are sold?

Not always. Many warranties stay with the original owner unless the manufacturer allows re-registration or issues a transfer approval. Some cannot transfer under any circumstances. The agreement should reflect what is possible so expectations match reality.

What information should I review before relying on a warranty?

You should review the warranty terms and the documents that support it. Proof of purchase, installation records, and service history help you confirm that the asset remains eligible for coverage.

What if a warranty cannot transfer?

If a key asset cannot bring its warranty into the sale, you should take that into account when evaluating the asset’s value. Some buyers adjust the purchase price, request other protections, or decide the asset makes more sense outside the transaction.