You Sold the Business but Did You Sell the Liability?

The owner of a manufacturing company sells its assets and retires. The purchase price has been paid, the new owner runs the operation and the seller considers the chapter closed. Four years later a former customer alleges that equipment installed before the sale caused a loss. The seller points to the purchase agreement and says the buyer agreed to take responsibility for liabilities. The buyer reads the same clause and says the claim isn't covered. Neither party can resolve the dispute simply by calling the clause an indemnity. A contractual promise to reimburse someone for a specified liability depends on the words used, the scope of the transaction and the claims covered by the bargain. The third party's underlying claim may survive regardless of which contracting party must ultimately bear the cost.