Bankrupt projects getting new owner... do we continue under same contract? 1

[VYordan]

This must have been a typical situation in the last few years with the economy rundown. A project is designed, construction starts, only 2 structural shells are constructed -Rc walkups- and the project goes bust and the bank takes it. There is no construction activity for 7 years or so and the bank sells the project to a new investor for pennies on the dollar....
And the construction code has also been revised in those years.... And I am not really interested with continuing with the project due to very disagreeable circumstances
with project.
So, suppose that my priorities and business has changed in those years, do I have a contractual obligation with the new party?
Thanks.

 

[msquared48]

You need something IN WRITING with the new owner, even if it is a letter or email agreeing to, or modifying, the original contract. A new contract would be best, however, with the signatures of both parties.

Mike McCann, PE, SE (WA)

 

[miningman]

With all due respect to Mr McCann, I disagree. Unless your original contract contained a clause to the effect that "reponsibilities of this contract will pass to all heirs , executors and ......" then you need absolutely nothing in writing. You are free to walk away from this project permanently if that is your desire. Of course you really need advice from a lawyer rather than a bunch of engineers but I cant see it needs more than a 5 minute review of the original contract for a lawyer to provide definitive answers.

 

[msquared48]

miningman:

My response was predicated on the assumption that the new owner wanted to continue the design relationship with the OP.

Of course both parties can just walk away should they desire, since, technically, there is no contract specifically between them. I am not a lawyer, but I would argue till the cows come home the legality of the clause you mention, and would have to check it out with a lawyer. Seems you would be obligating the new owner to a contract he has not agreed to and signed. Just does not feel right to me.

Mike McCann, PE, SE (WA)

 

[VYordan]

I do not want to continue with the contract. It was with the architect originally but the conditions have changed I guess.
VYordan

 

[IRstuff]

"Seems you would be obligating the new owner to a contract he has not agreed to and signed. Just does not feel right to me."

Not really, since the new owner, in doing their due diligence should have read the contracts currently in force and determined that they would be buying those contractual clauses as well. Typically, a purchaser buys assets and liabilities of the company being purchased. In the OP's example, it's unclear whether the bank actually bought the only the property or the business of the "project." In either case, one can probably argue that the contract is null and void, due to lack of continuity, and probably due to expiration of contractual time lines. I can't imagine anyone successfully arguing that a contract that has lapsed for 7 yrs is still valid and enforceable. If nothing else, the pricing for the work to be done could not possibly be expected to be valid after a 7-yr lapse.

TTFN
faq731-376

Need help writing a question or understanding a reply? forum1529

Of course I can. I can do anything. I can do absolutely anything. I'm an expert!

 

[zdas04]

I had a (LLC) client go bust and all my stock became zero value (they paid half of my consulting fees in stock). I asked an attorney if the "successors clause" of our contract applied to the bank and he said that it was very clear in case law that if the bank takes over, the contracts in place don't become the bank's asset/liability. If the LLC had sold out (even if the sales price was just enough to avoid bankruptcy and the stock value was still zero), then the contracts would go to the new owner. According to him the contracts can't survive a dissolution.

David Simpson, PE
MuleShoe Engineering

Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat

 

[MacGyverS2000]

I'm with IR, and for the exact reasons zdas mentions...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[CELinOttawa]

Even when a contract clearly stipulates that successors and assigns are bound, I always request re-signing in order to clarify exactly who is who in terms of parties to the contract.

- If I want the work, this is "since the contract is still in force, our request is to provide clarity and further develop our working relationship."

- If I don't want the work, this is then "Given the delays and changing fundamental nature of the project we believe a new contract is required in order to coniltinue with the works."

I think many an engineer would be surprised how many clients will let you out of binding contract just because you ask/imply you want out. After all, who wants a Consultant who doesn't want to do the job?