Grantor remains liable: Overview, definition, and example
What does "grantor remains liable" mean?
"Grantor remains liable" refers to a situation where the person or entity (the "grantor") who transfers or grants a right, asset, or property to another party (the "grantee") remains responsible for certain obligations or liabilities associated with that asset or transaction. In legal agreements, this phrase indicates that even though the grantor has transferred rights or property, they are still held accountable for any ongoing duties or debts tied to the asset, unless specifically stated otherwise in the contract.
In simpler terms, when a grantor remains liable, they are still responsible for certain aspects of the transaction, even after giving away or transferring the asset.
Why is "grantor remains liable" important?
This concept is important because it clarifies the responsibilities of the grantor in a transaction, ensuring that they are accountable for any obligations related to the property or asset being transferred. In some cases, the grantee may not assume full responsibility for any liabilities or risks associated with the asset. By including the "grantor remains liable" clause, the grantor ensures that they continue to bear responsibility, which can help prevent disputes or misunderstandings later.
For SMB owners, understanding this term is crucial when transferring assets or rights, as it can affect the extent of their ongoing obligations and liabilities, even after the transfer is made.
Understanding "grantor remains liable" through an example
Imagine your business sells a piece of equipment to another company but agrees to let them pay in installments over time. As part of the sale, the agreement includes a "grantor remains liable" clause, which means that if the buyer defaults on their payments, your business (the grantor) will still be responsible for covering any outstanding debt, even though the equipment was transferred to the buyer.
In this case, the "grantor remains liable" clause ensures that your business is still responsible for the debt associated with the equipment, even though it has been transferred to another party.
Example of a "grantor remains liable" clause in a contract
Here’s an example of what a "grantor remains liable" clause might look like in a business agreement:
“Notwithstanding the transfer of ownership, the Grantor remains liable for all outstanding debts and obligations associated with the asset as of the date of transfer. The Grantor agrees to indemnify and hold the Grantee harmless from any claims arising from these obligations.”
Conclusion
"Grantor remains liable" is a critical legal concept that ensures the person or entity transferring an asset remains responsible for certain obligations after the transfer. For SMB owners, it’s essential to understand this clause in agreements to ensure clarity about ongoing responsibilities, especially in asset sales or transfers. By including this clause, businesses can protect themselves from potential liabilities and maintain accountability, even after a transaction has been completed.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.