The general rule is that an asset purchaser does not assume the seller's liabilities. Recognized exceptions include express or implied assumption, de facto merger, mere continuation of the predecessor, and transactions entered to escape liability.
A product line exception imposing liability on manufacturers who continue a predecessor's product line is recognized in a minority of states.
Alternative Names:
Successor Corporation Liability, Asset Purchaser Liability
Why it Matters?
Successor liability determines whether a viable defendant exists when the entity that caused the harm no longer operates, which is common in product cases involving equipment manufactured decades earlier. The analysis turns on transaction structure and continuity of ownership, management, and operations. Because it can attach years after an acquisition, it is a live diligence issue in any deal involving a manufacturing business.
Frequently Confused with
Related terms
Frequently asked questions
Does buying assets avoid the seller's liabilities?
Why does this matter in product cases?
