excluded liabilities
Definition
Excluded liabilities are the debts, obligations, and legal problems that a buyer refuses to take on when purchasing a business or its assets. The seller keeps these specific responsibilities and must handle them personally, even after the sale closes. Both parties spell out exactly which liabilities are excluded in the purchase agreement to avoid confusion later.
Example
If you sell your bakery and the buyer excludes any lawsuits filed before the sale date, you remain personally responsible for paying out if a customer sues you over a slip-and-fall that happened on your premises last year.
Watch Out
Sellers sometimes underestimate how costly excluded liabilities can become, so you should always get a clear written list of every obligation you are keeping before you sign anything.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.