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Successor Liability and Asymmetric Information

Albert H. Choi

University of Virginia School of Law

July 24, 2007

The doctrine of successor liability transfers tort liability arising from the seller's past conduct from the seller to the buyer. If the buyer has as much information about the liability as the seller, all beneficial acquisitions take place and the seller takes the efficient level of precaution. However, if the seller has more information about the liability than the buyer, not all beneficial acquisitions are consummated and the seller takes a suboptimal level of precaution. I argue that, in the presence of information asymmetry, the courts should increase the damages against the (potential) seller to provide better incentives to take precaution while decreasing the damages against the buyer to encourage more beneficial asset sales.

Number of Pages in PDF File: 23

JEL Classification: K13, K22, K32

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Date posted: February 28, 2006  

Suggested Citation

Choi, Albert H., Successor Liability and Asymmetric Information (July 24, 2007). Available at SSRN: https://ssrn.com/abstract=885951 or http://dx.doi.org/10.2139/ssrn.885951

Contact Information

Albert H. Choi (Contact Author)
University of Virginia School of Law ( email )
580 Massie Road
Charlottesville, VA 22903
United States

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