What happens if I discover the seller was already being sued by a customer before I bought the business?

Most purchase agreements require the seller to disclose pending or threatened litigation, so an undisclosed lawsuit that predates your purchase generally engages that specific representation. Discovering it after closing typically supports an indemnity claim for breach of that disclosure obligation, subject to the survival period, cap, and basket negotiated for it, and potentially a broader misrepresentation claim as well if the omission looks like more than an oversight.

If you learn about the existing lawsuit before closing instead, the analysis shifts toward a disclosure or condition problem, which can let you delay or refuse to close rather than proceeding and relying on an after-the-fact claim — generally the better position if you're still in time to use it. Whether the underlying lawsuit also exposes you directly depends heavily on deal structure: in a share sale, the corporation and its existing litigation come with you; in an asset sale, undisclosed litigation risk is generally more contained to whatever liabilities you expressly assumed. Confirm the structure and the specific disclosure representation before assessing your exposure.