Question

Ray Wilkins bought a car at Peterson Auto Sales on credit in 2015. He made half...

Ray Wilkins bought a car at Peterson Auto Sales on credit in 2015. He made half of the payments before he decided to sell the car. He sold the car in 2016 to Darla Cunningham on condition that she makes the rest of the payments to Peterson. Hal Peterson, owner of Peterson Auto Sales, dissolved the business and sold its assets to Epic Auto Sales in 2017. Epic did not notify Cunningham of the change in ownership until 2019. Through 2018, Cunningham had been making payments to Peterson. In 2020, Cunningham became delinquent on her payments. Which of the following statements about the year 2020 is true?

Multiple Choice

Unless a novation occurred, Wilkins owes Epic the remaining debt.

Wilkins owes Peterson the remaining debt even if a novation did not occur.

Wilkins owes both Epic and Peterson the remaining debt, even if a novation occurred.

Wilkins owes Epic the remaining debt only if Peterson does not pay it off.

Unless a novation occurred, Wilkins owes Peterson the remaining debt.

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Answer #1

Through novation the contractual agreement is transferred from one party to another.

In the above case, Wilkins purchased car from Peterson, thus he owed the partial money to Peterson. However, Peterson sold his car to Darla on the condition that she makes the remaining payment to Peterson . Peterson dissolves his business and sells the assets to Epic. A novation would be required to transfer the debt from Wilkins to Darla. Also, Neither Peterson nor Epic informed regarding the change of ownership nor did Wilkins informed regarding the sale of car to Darla. Thus, Wilkins has to continue making payments to Peterson until the novation is done.

Answer is Unless a novation occurred, Wilkins owes Peterson the remaining debt.

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