Bulk Sales Law in United States
Practical Information
Note: Some of this information was last updated in 1982
Legislation designed to protect the creditors of a seller who liquidates all or most of his or her assets to a single buyer at a single time. Sometimes a merchant wanting to go out of business will find someone to buy all assets at once. To protect the creditors of such a merchant from being defrauded, most states have enacted bulk sales legislation. Although the laws vary in detail from state to state, in general they provide that the purchaser of all or a major portion of a merchant’s stock, other than in the regular course of business, should obtain from the seller, under oath, a list of all the seller’s creditors, their addresses, and the amount owed to each of them. The buyer is then obliged to give each creditor notice of the pending sale, usually ten days before possession is transferred and payment is made. This procedure allows the creditors a brief period in which to press or secure their claims before the assets are beyond their reach. The bulk sales laws do not apply to court conducted sales such as those resulting from proceedings in bankruptcy (in U.S. law) or trusteeships. In some states the statutes apply only to retail merchants, in others to retailers and wholesalers, and in still other states to anyone disposing of most business assets to a single buyer. A buyer failing to comply with the law may be liable to the seller’s creditors on a pro rata basis up to the value of the goods received from the seller.
What is Bulk Sales Law?
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