Legendary Auctions. Should I call the police on them about having possible stolen material

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Posted By: PC

It is standard M&A practice in the context of an asset sale to transfer the assets, and not the liabilities, to the buyer. This is often the case when there are liabilities that a buyer would otherwise not want to deal with. The presence of such liabilities is a determining factor whether a deal is stuctured as an asset purchase or a stock purchase (although tax and other considerations also come into play).

Contracts entered into by the selling entity are assets that can be assigned to the buying entity, if the contract allows that to happen. That assignment may, or may not, require the consent of the other party to the contract. Some contracts are freely assignable by their terms, some have specific prohibitions on assignment, some have conditions to assignment (like consent of the non-assigning party), and (surprise) some contracts that have anti-assignment provisions are still assignable by law (for example, the UCC renders certain anti-assignment provisions unenforceable).

In this case, I would be surprised if the auction house's standard form of consignment agreement did not allow the auction house to assign the agreement without the consent of the consignor. After all, the auction house writes the agreement, and it is a safe assumption that it was drafted to give the auction house maximum protection and maximum flexibility. Most consignors (like most people) don't read the fine print, either becasue they don't care, don't see the likelihood of these situations coming into play, or don't have the leverage to object to such a provision (even if they did read it and cared).