A bulk sale is a sale of goods by a business which engages in selling items out of inventory, often in liquidating or selling a business, and is governed by Article 6 of the Uniform Commercial Code (UCC) which deals with bulk sales. Article 6 has been adopted at least in part in all states. If the parties do not comply with the notification process for a bulk sale, creditors of the seller may obtain a declaration that the sale was invalid against the creditors and the creditors may take possession of the goods or obtain judgment for any proceeds the buyer received from a subsequent sale.
UCC Section 6-104 specifies the duties of the bulk sales buyer, including determining the identity of the seller, and preparation of a list of claimants and a schedule of distribution. These duties are imposed on the buyer in order to give claimants the opportunity to learn of the bulk sale before the seller has been paid and disappeared with the money.
The North Dakota Provision in Bulk Sales Agreement Regarding Information to be Supplied by the Seller is an important clause that ensures transparency and protection for both parties involved in a bulk sales transaction. This provision outlines the specific information that the seller is required to provide to the buyer regarding the assets being sold. Under this provision, the seller is obligated to furnish comprehensive information related to the assets, including but not limited to: 1. Full Disclosure: The seller must disclose all pertinent details about the assets, such as financial statements, tax returns, appraisals, and any potential liabilities associated with the assets. 2. Inventory Details: The seller needs to provide a detailed inventory of the assets included in the sale, including their description, quantity, quality, and condition. 3. Outstanding Liabilities: The provision mandates the disclosure of any outstanding debts, encumbrances, or liens associated with the assets being sold. This information is crucial for the buyer to assess the financial health and potential risks involved in the transaction. 4. Contracts and Agreements: The seller must disclose all existing contracts, agreements, leases, or licenses related to the assets, outlining crucial terms and conditions. This includes any pertinent details regarding royalties or future obligations. 5. Intellectual Property Rights: If applicable, the seller needs to provide information about any registered or unregistered intellectual property rights associated with the assets, such as trademarks, copyrights, or patents. 6. Employee Details: If the sale includes a business entity, the seller should provide details about the employees, including their names, positions, compensation plans, and relevant employment agreements. 7. Environmental Compliance: The provision may require the seller to disclose any environmental permits, licenses, or compliance records relevant to the assets, ensuring that the buyer is aware of any potential regulatory issues or liabilities. 8. Insurance Information: If the assets are insured, the seller needs to provide information about the insurance coverage, policy limits, and any claims or losses filed in the past. It is important to note that variations of this provision may exist depending on the specific terms negotiated by the parties involved. Therefore, it is crucial for buyers and sellers to carefully review the bulk sales agreement to ensure that all relevant information is adequately addressed and disclosed in accordance with the North Dakota Provision.
