Legal-Ease: Warranties and out-of-business retailers

When a business closes, its commitments are typically canceled along with the business itself. So, for example, a retailer that closes down may have the ability to walk away from its property lease. This applies to contracts with other vendors as well.

Among contracts that a business may walk away from upon closure are warranties. Warranty liability for closed businesses usually will break out into two categories.

First, there are warranties that are offered by the business itself, such as an extended warranty. Second, there are manufacturer warranties.

When any business closes, its commitments are typically cancelled along with the business itself. Whether or not the closing business actually files a case in bankruptcy court does not significantly affect the business’s obligations in the context of the business’s closing. Essentially, if a business owns little to nothing, there is little to nothing to use to satisfy that business’s obligations, regardless of whether the business is in bankruptcy.

As a result, for example, if a retailer ceases operation, the retailer may have the ability to walk away from its property lease as well as the retailer’s other contracts with local vendors for landscaping, uniforms, security or other services.

Read more about how warranties are treated when a business shuts down in Lee’s article in the Lima News here: Legal-Ease: Warranties and out-of-business retailers

Source: LimaOhio.com, “Legal-Ease: Warranties and out-of-business retailers,” by Lee R. Schroeder, January 12, 2019

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

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