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.In hopes of escaping liability,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 and help ABC avoid liability 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 the majority of states applying the traditional successor liability rule, if a company acquires the assets of another company and there is evidence that the transaction was entered into wrongfully in order to escape liability for the predecessor's debts, the successor company may be held liable for those debts. In this case, ABC Company was aware of the injuries caused by its product, yet instead of taking responsibility for the harm caused, it decided to sell its assets to XYZ Company at a bargain price. This may be seen as an attempt by ABC to escape liability, which could result in XYZ being held liable for the injuries caused by the contraption. Therefore, choice D is the best answer.

ABC Company Manufactures a Contraption Meant to Enable a Rider