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Roger L. Neu

 

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Agreements/Contracts

Question: I am buying a business and want to know if I should accept the Seller’s offer to prepare the purchase agreements?

Only accept this offer when pigs can fly. In other words, unless pigs have made some aviation advances that I am not aware of, the Buyer should never have the Seller prepare the acquisition documents. Sellers would be happy with a one-page bill of sale and payment in cash, but Buyers should have agreements that contain adequate detail, disclosure and provisions along with representations and warranties to protect their interests. If you think, as the Buyer, that having the Seller prepare the agreements will save you money, you will generally find the opposite to be true. It takes more time and cost to fix a bad agreement than to start with the right agreement.

Question: How important are the purchase agreement schedules/exhibits to a transaction?

Schedules and exhibits to the purchase agreement are an integral part of the total agreement. Post-closing problems that may arise in the sale of a business would generally arise out of information (misinformation) included on the schedules or in the exhibits. The schedules usually arise out of the representations and warranties in the agreement. Each of the representations and warranties should be read very carefully and the information to be set forth on a schedule should be accurate and complete in all material respects. The Seller always needs to understand that even if the Buyer knows that something is not correct or has knowledge of a certain fact, that knowledge will not in any way mitigate Seller’s liability for a breach of the agreement or misrepresentations contained in a representation and warranty.


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