CHAPTER 41: MERGERS AND TAKEOVERS 11
when the purchasing corporation expressly or impliedly assumes those liabilities. In the American Standard case, the
parties’ contract expressly stated that the purchase of assets was subject to the liabilities of Kewanee. Therefore, the
exception just mentioned applied to the case.
How does this case illustrate the kinds of problems that can arise over contract interpretation? The
facts of the American case—in particular, the different meanings that the two parties derived from the contract’s
language—illustrate the kinds of problems that can arise over contract interpretation. To avoid such problems,
Why is an acquiring corporation shouldered with the liabilities of an acquired corporation when the
acquirer was most likely not involved in the circumstances that gave rise to the liabilities? Shouldering the
acquiring corporation with the liability of an acquired corporation, even when the acquirer was not involved in the
circumstances that gave rise to the liability, is an issue of fairness. If the liability was not imposed, corporate
How might the Internet prevent a prospective acquiring company from unknowingly assuming the
liabilities in a purchase of assets? The Internet can prevent a prospective acquiring company from unknowingly
assuming the liabilities of an acquired company in a purchase of assets because it is generally easier to research the
Footnote 4: The shareholders of Mt. Princeton Trout Club, Inc. (MPTC), made up the board of directors.
Despite MPTC’s articles of incorporation, which prohibited a sale or lease of corporate assets without a vote of the
directors, MPTC officers entered into leases and contracts to sell corporate property without notice to the directors.
MPTC never filed federal income tax returns, and did not timely pay its local property taxes. Also, some corporate
funds were not accounted for, and minutes of some corporate meetings were withheld from the shareholders. Sam
Robert Green was one of the original eight shareholders. After 1996, Green no longer owned any shares,
however, although he had acquired the proxies to vote five shares by buying and reselling the stock while retaining
the voting rights. Among other things, Green opened the corporate checking account in his own name, not in MPTC’s