Assumption is a concept often used in contract law. It is a voluntary act by which one party takes over or assumes the obligations of another. It is a form of transferring liability from one to another. Assumption is a legal concept and may or may not involve a transfer of funds or assets. When assuming a liability from another party, you become responsible for the payment of whatever obligations are assumed.
Examples of Assumption in Business
An example of assumption in business is when a company purchases another company. The new owner assumes the liabilities of the previous business, including any debts, obligations, and contracts. The new owner may also be liable for any wrong-doing of the previous company, and for any lawsuits or claims that the previous company has incurred.
Another example of assumption is when a landlord agrees to assume the current tenant’s lease at a commercial property. Under this agreement, the landlord takes on the responsibility of any rent or other fees that the tenant is responsible for.
Key Takeaways
Assumption is a legal concept by which one party takes on the obligations of another. It is not always a transfer of funds or assets, it is simply a transfer of responsibility. It is common in business transactions when one company acquires another or when a landlord agrees to take over a lease from a tenant. It is important to understand the implications of assuming a liability as it can have long-term consequences.