Purchase of Business - Buyer Protection Clauses in a Contract for Purchase of Business
The pre-printed form contracts sold in Stationary stores prepared by companies such as Allstate or Blumberg are excellent outlines and starting points for buying a business. However, they do not fully protect the interests of the Buyer. The Buyer should demand additional guarantees from the Seller, over and above those usually mentioned in the form outlines. The following are some additional sample provisions to negotiate and protect the interests of the proposed buyer in a Bulk Purchase of a business.
Seller represents and warrants to the Buyer that up until the time of closing:
No Judgments 1. There are no Judgments outstanding and unsatisfied against the Seller or the business and business assets being sold herein.
No Liens 2. There are no liens or encumbrances against Seller or the business or assets being sold herein and that there are no actual or contemplated disputes, claims or law suits affecting or potentially affecting the Seller or the business and assets being sold herein.
Good title 3. Except as to the following specified items, the Seller has good, valid and marketable title to the assets being sold herein and shall sell, transfer and convey the said assets free and clear of all liens and encumbrances.
Taxes paid 4. All incorporated or unincorporated business and incomes taxes, employee withholding, FUTA, FICA, Sales, Business Property, Unemployment and Disability that are due to any governmental entity have been appropriately and timely paid up through the date of closing and all applicable returns filed in a timely manner. An escrow in the amount of $_____ shall be held pending tax payment verification from the State.
Accounts paid 5. All accounts payable to the suppliers, vendors and others owed money by the Seller in connection with the business being sold herein have been paid in full. Seller agrees to provide buyer with a complete list of all said accounts.
Working order 6. That the plumbing, heating, cooling and electrical systems are presently in working order and will be in working order at the time of closing. All personal property and fixtures included in the sale herein shall be in working order at the time of closing.
No Code violations 7. At the time of closing, no violations will exist as to any municipal, state or federal laws, codes or regulations concerning the use and operation of said business in the premises as set forth herein. If a violation exists, Seller must fix or cure.
Nothing to impede sale 8. Seller knows of no facts which would impede the use of the property to be transferred by this Contract for the business purpose described herein.
Risk of loss 9. Risk of loss or damage to the assets being sold herein or Seller's premises shall remain with the Seller until the Closing of Title.
Trade name 10 - Alternative 1. Seller shall furnish Buyer at closing a Cancellation of Business or Trade Name Certificate in proper form so that it can be recorded for cancellation of same with the county recording officer.
10 - Alternative 2. Assignment and transfer of Trade Name: Seller shall furnish Buyer with an assignment and transfer of all Seller's right, title and interest in the business and trade name of seller
Lease 11. This Contract is contingent upon Buyer executing a lease to the building with Seller's landlord. Furthermore, Buyer shall execute an Assignment and Assumption Agreement with respect to sub lease if Buyer is able to execute same with Landlord.
Inventory 12 The value of the inventory shall be determined on date of closing, determined by an Inventory Service Company listed in the Bell Atlantic New Brunswick Area Yellow Pages. Cost of inventory appraisal to be split equally between Buyer and Seller. Price paid by the Buyer shall be the retail value of stock in trade less 30%.
Conclusion Remember, the Contract will become binding as soon as the Buyer and the Seller sign it. Their is no three day attorney review period as in a residential house purchase. Before anyone signs a business contract, have an experienced business attorney review the contract and make necessary revisions.
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