ABC Company manufactures a contraption meant to enable a rider to fly behind a ski boat.After a few months,ABC begins to hear of injuries when riders crash into water or boats.The president of ABC Company decides to discontinue business and sell all assets to XYZ Company.The president of XYZ Company is excited to purchase the assets at a bargain price based upon the assertion of the president of ABC that XYZ cannot legally be held liable for the flying accidents.Which of the following is true in a majority of states applying the traditional successor liability rule?

Question

Quizplus · Accepted Answer

In a majority of states applying the traditional successor liability rule, the purchasing company can be held liable for the predecessor's liabilities if the transaction was entered into wrongfully to evade liability. This is known as the "fraudulent transfer" or "continuation" exception to the general rule of successor non-liability. Therefore, since the president of ABC Company is explicitly trying to transfer the liability to XYZ Company without mitigating the risks, XYZ Company may be held liable for the accidents.

ABC Company Manufactures a Contraption Meant to Enable a Rider