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Question added to topic Legal Basics For StartupsNovember 12, 2010

Is my franchise agreement void if the entire company went bankrupt?

The company was sold to another brand.
Whether your franchise agreement can be voided depends on what it says. First, you will want to look for language that indicates whether or not the franchise agreement (or certain provisions) "survive the termination of the agreement."

Despite the franchise going bankrupt, the terms of the franchise agreement may make you personally liable for certain payments--and if you have not filed for bankruptcy protection, you could still be on the hook.

In addition, you'll want to look for language that allows the agreement to be "assigned" to another party, and what happens if that event occurs. Selling the company to another brand may or may not count.

To get a clear read on whether the agreement is still in force, you'll want to show it to an attorney who focuses on franchise matters.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.

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