A buy-and-sell agreement is a lawful contract that details the terms of a business exchange. It will clearly state the terms of the sale and the conditions that need to be met in order for the deal to be completed. It is the conclusion of negotiations between buyer and seller and finalizes the sale’s terms and conditions. It also often specifies how your share of the business may be transferred if you leave the company or die.
This type of agreement is used in various contexts, such as the sale of real estate, goods, and services, or other esteemed assets. It is also known as a sales agreement form, a purchase agreement, or a sales contract.
The purpose of a buyer and seller agreement is to act as a lawfully binding contract between two parties who are taking part in an exchange of money for goods and services and/or property. One party is the seller, while the other is the buyer. Speak with a business attorney in Los Angeles about the importance of a buyer and seller agreement if you are considering buying or selling something.
When is a Sales Agreement Needed?
Any time you buy or sell something that requires more than just transferring ownership, a sales agreement is necessary. Details like down payments, closing costs, financing, titles, insurance companies, and more need to be clear-cut and understandable by all involved parties. The contract obligates the buyer to buy and the seller to sell, and details imperative information such as:
- Price of service/good/property
- Payment terms of the sale
- Sales conditions to be met
- Due diligence periods
- Remediation available upon damage of the product
Defining Due Diligence in a Buyer and Seller Agreement
Due diligence is defined as reasonable steps taken by a person or party in order to legally satisfy a requirement, especially when selling or buying something.
In the sale of larger assets, there is usually a section in the buyer and seller agreement that requires the buyer to acknowledge their due diligence throughout the process. The agreement may outline additional periods of due diligence that may relate to upfront payments or additional deposits.
This section also most likely includes the buyer’s acknowledgment of the condition of the assets upon purchase. The buyer usually also certifies their legal right to end the deal under specific circumstances.
Covenants/Closing Conditions
A Buyer and Seller agreement typically summarizes the necessary steps to be taken in the transactions. These terms of the sale must happen in order for the sale to be legally binding; any failure to adhere to these conditions may be considered breaching the contract. The buyer may hold the legal right to end the sale under these circumstances.
Several of these covenants encompass protection of the asset and risk mitigation. This section usually outlines what a seller is to do if any unexpected litigation impacts the transaction. It also explains what insurance requirements protect the asset through sale, which guarantees will continue, and verifies the uniqueness of the asset being sold.
Remedies/Damages
There may be situations in which conversation is necessary to delineate what action either party will take if the sold asset endures damages during transit or at some point prior to the sale. This section usually outlines specific levels of damage including minor and major damage. Then, the contract outlines varying solutions for each level of damage.
How a Business Attorney Can Help Create A Buyer/Seller Agreement
Hiring a business attorney in Los Angeles can provide you and your business with several significant benefits. Agreements like a buyer/seller agreement have many legal complexities that may impact your financial interests and the health of your business. Here are some reasons why you may benefit from the help of a business attorney:
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- Legal expertise: Business lawyers possess a deep understanding of relevant business regulations and laws and can help you to adhere to these and abide by them when necessary.
- Customization: All business transactions are different. A lawyer can help tailor your business agreement to meet your specific needs and those of your buyers/customers. You may need to consider factors such as payment terms, the type of goods/services, warranties, and other specific details.
- Complex language: Contracts may involve elaborate legal language that may be too complex for those without legal knowledge/training. A lawyer can draft the agreement using understandable language that accurately reflects the information outlined.
- Risk reduction: A lawyer can help identify potential risks and include clauses that mitigate them. This may include indemnification, liability limitations, and dispute resolution.
- Avoid ambiguity: Ambiguous terms in a contract can lead to disputes and misunderstandings. An attorney can help ensure that your agreement is clear and concise and leaves no room for interpretation.
- Enforceability: An agreement that is well-drafted by a legal expert is more likely to uphold in court if anything goes wrong.
Why is a Buyer and Seller Agreement essential?
A Buyer and Seller Agreement protects both the buyer and seller in a legal sense. It is a smart idea to have the terms and conditions of the sale outlined and agreed upon prior to the occurrence of the transaction. Without a contract in place, you will have no legal recourse in a failed transaction.
Is a Buyer and Seller Agreement legally binding?
Yes, buyer and seller agreements are legally binding. It is signed by authorized representatives of both parties when both sides are ready and able to seal the deal. It is often the last document furnished as part of the sale or purchase of an asset and legally protects everyone involved in the exchange.
Overall, a Buyer and Seller Agreement can help serve as a reference point to clear up any/all disputes that may arise between the buyer and seller before, during, and after a sale takes place. A business attorney can help draft and create your agreement to avoid any legal issues that may arise.
