Can hidden warranty claims from past customers become my problem after I buy?
It depends heavily on how your deal is structured. In a share sale, warranty obligations owed by the corporation to past customers generally come with it, since the same legal entity that made those promises continues to exist and continues to owe them, whether or not the claims have been made yet. In a properly structured asset sale, warranty obligations tied to products or services already sold before closing are a liability you can choose not to assume, and unless your purchase agreement specifically takes them on, they should stay with the selling entity.
The practical risk in an asset deal isn't usually legal liability for old warranty claims — it's reputational and operational. Customers who bought a product or service before you took over often don't distinguish between "old owner" and "new owner" when something goes wrong, and refusing to honour a warranty a customer reasonably expects can damage goodwill even where you're not legally required to do anything.
Decide deliberately whether you'll honour existing warranty commitments as a business decision, separate from the legal question of whether you're required to, and make sure your purchase agreement is clear either way. A Treadstone business lawyer can help align your legal exposure with your actual customer-facing plan.
Key takeaways
- Warranty obligations generally transfer with the corporation in a share sale.
- A properly structured asset sale can leave old warranty obligations with the seller.
- Even without legal liability, customers may still expect warranties to be honoured after a sale.
- Decide your warranty-honouring approach deliberately, and document it clearly in the agreement.