contract-law
Revenue share contract w merged company
<p>Company A developed Product A and has a revenue sharing agreement with Partner A (who sold Product A) to Client A. The revenue sharing agreement is open ended, i.e. does not expire.</p>
<p>Enters Company B with Product B. Product A and Product B are essentially the same with  Product B being a newer version of Product A.</p>
<p>Company B acquires Company A who agrees to merge with Company B, with Company B being the surviving company. Company B intends to kill Product A and offer Product B instead to Client A.</p>
<p>Question -  what happens to the revenue share agreement with Partner A - does Partner A have the right to continue to invoice Company B for its revenue share... given that Product A was discontinued?</p>

<h2>It depends on the contracts</h2>
<p><strong>The &quot;merger&quot;</strong></p>
<p>Partner A has no contract with Company B, only with Company A. Therefore, Company B has no rights or obligations towards Partner A unless they are part of the merger or acquisition of Company A. So, there are two contracts that need to be considered, the original one between Partner A and Company A and the merger contract between Company B and Company A.</p>
<p>If the merger contract does not assign or novate the original contract from Company A to Company B, then Company B has no contract with Partner A. They can safely ignore Partner A.</p>
<p>If the original contract is <a href="https://feldman.law/news/what-happens-to-contracts-after-business-is-sold/#:%7E:text=When%20a%20transaction%20closes%2C%20the,process%20for%20each%20existing%20agreement." rel="nofollow noreferrer">assignable</a> (the default position) and the merger contract makes that assignment (either with reference to the particular contract or in general with all ongoing contracts), then Company B has assumed the rights and obligations of the contract with Person A as a successor-in-interest. At the same time, Company A remains liable for the obligations under the contract if Company B defaults. That is, if Person A is wronged under the contract, they can sue Company A or Company B, or both.</p>
<p>If the contract is not assignable, it must be novated. this substitutes Company B for Company A as if they had always been a party to the contract. However, Person A has to agree to the novation. Such an agreement may already be in the original contract.</p>
<p>There are some contracts, notably personal services contracts, that are neither assignable nor novatable. In this case, a new contract would need to be negotiated.</p>
<p>Whatever happens, the merger will not end the contract - Person A will still have a contract with Company A <em>or</em> Company B. If it is an actual merger rather than an acquisition, there will be a new Company C that might hold the contract. Notwithstanding, there is still a contract between someone and Person A.</p>
<p><strong>The original contract</strong></p>
<blockquote>
<p>Question - what happens to the revenue share agreement with Partner A - does Partner A have the right to continue to invoice Company B for its revenue share... given that Product A was discontinued?</p>
</blockquote>
<p>Depends on what the contract says about discontinuing Product A.</p>
<p>While the contract, as described, is indefinite, I doubt very much if it is perpetual. Hopefully, the people who drafted the original contract dealt with the very realistic contingency that Company A (or whoever now holds the contract) might want to stop selling Product A. After all, no product keeps being sold forever. If so, then do what the contract says.</p>
<p>If it doesn't, then Company A (or whoever) is probably under no obligation to a) continue to sell Product A and b) pay Person A if they aren't.</p>
