Learn the Basics of Drafting and Reviewing of Sales and Purchase Agreement
There will come a time where businesses, big, medium or small will have to face sales and purchase agreement. The sales and purchase contract are essential to ensure you and your business are protected against any mishaps and for the purposes of due diligence as well. Therefore, the basic of drafting and reviewing of sales and purchase agreement is a must-know for all entrepreneur in the industry. Find out more below.
What Should I Include in My Sales and Purchase Agreement Treaty?
Your agreement should oversee every aspect of your sales and purchase; no detail is too big or small, but keep in mind not to be redundant. Your list should:
1. Describe the Transaction
Who is involved? How much are you purchasing or selling it for? What are the conditions of this transaction? When you’re drafting the treaty, be sure to include important information such as the type of operation, whether it is an asset or a business, stocks or shares. Use direct, straightforward language and be precise.
2. Cover the Terms and Conditions
After you and transaction partner have agreed upon a number, move on to clarifying:
- Payment methods
- Forecast or not of deferred payments
- Deposit requirement
- Whatever deemed suitable
It is best to settle the prerequisites early on from the deal to avoid any misunderstandings. Also, it is crucial that you run through all the terms before presenting it to the transaction partners in order to steer clear from confusion and loopholes.
3. List Included Items
By that, we mean everything under the sun. If assets are involved, then list an accurate inventory. Among the elements that should be in your contract are:
- Physical assets
- Business records
- Name of the business
- Logo and trademarks
- Patents and formulas
- Relevant data
Not only that, do not forget to include liabilities in your list as well. This applies for loans, debts or accounts payable by the transaction partner. Consider including a suitable non-compete clause to avoid your transaction partner from setting up a similar company and becoming your future competitor.
Another key component to add in your treaty is a non-disclosure agreement. In a case where something unfortunate happens after your purchase, you can hold your transaction partner responsible. In a way, a non-disclosure agreement acts as insurance; it protects you and your newly purchased company from suffering liabilities or debts. Having a non-disclosure avoids you from getting scammed by irresponsible sellers who might run away or fled after selling their business to you.
5. Finalizing the Document
Just before you seal the deal, double and triple check the names and titles of involved parties and their witness (for witness signature purposes), dates and all the other components in your agreement, while you’re at that, be sure to check for typos and unclear sentences too. Finally, prepare multiple copies of the deal and have them signed. This will make all the parties involved satisfied, as they get to go home with their own original agreement. Lastly, have the documents attested by a notary.
And you’re all done!