Discuss whether Lockhart is obligated to pay Hutchison’s debt to Johnson.
Johnson, who owned a hardware store, was indebted to Hutchinson, one of her suppliers. Johnson sold her business to Lockhart, one of Johnson’s previous competitors, who combined the inventory from Johnson’s store with his own and moved them to a new, larger store. Hutchinson claims that Lockhart must pay Johnson’s debt because the sale of the business had been made without complying with the requirements of the bulk sales law. Discuss whether Lockhart is obligated to pay Hutchison’s debt to Johnson.
A bulk transfer,as described by Article 6 of the Uniform Commercial Code, is any transfer in bulk that may be done at a time and is not performed in the usual business of the transfer or wherein a major part of the materials, goods, and other items are sold. This condition is satisfied here; so,Person L may be liable to pay the arrears.
In this case,Person L is going to be held liable to pay the dues and make the settlement in favor of Person Hsincethe transaction may be considered a bulk transfer.
Certain requirements are to be fulfilled before a bulk transfer, such aspreparing a list of the current creditors, full listing of the property that has be passed on, preserving the creditor list for six months, and a notice should be given to the creditors at least 10days before the transferee takes hold of the goods orpays for them.