When drafting a contract for the sale of business, there are some key terms to be on the lookout for. Here’s our guide to some of the most common terms you might come across:
• Payment provision: The consideration and payment structure should be agreed between the parties. Your payment provision should cover whether a deposit is payable, the conditions for payment of the balance, as well as the consequences for failure or delay in payment.
• Assets: it is important to set out exactly what is included in the sale. A list of excluded assets is also a good idea to ensure the parties are completely on the same page.
• Conditions precedent: a common condition to purchase agreements is “pending finance” or “pending due diligence”. Never sign a contract assuming that you can change your mind, unless these conditions are set out each with their due dates. Conditions must be either satisfied or waived before completion of a transaction.
• Restraint provisions: it is common for the parties to agree that the vendor will not, for a defined period of time after completion, compete in the same industry and/or location. It is important that any restraints included in an agreement are reasonable.
• Confidentiality: mutual obligations of confidentiality are important to include in a sale agreement, not only for the disclosure of information throughout the due diligence process, but also often for disclosing information about the sale itself without permission to do so.
If you require assistance with as asset sale or purchase agreement or assistance generally with business sales, contact Rankin Business Lawyers for practical, on-point commercial legal guidance.
