Contract's To Buy a Business which is for Sale
Contracts- Keep Them Simple and Make Them Work
When you buy a business you’ll typically have to sign number of contracts. However, a contract doesn't always have to be a written document. You can have an oral agreement with a caterer to deliver fifty lasagnas to your house and agree to pay $10 per lasagna, and that too can be considered a contract. However, when you buy a business, get as much in writing as possible. This is because the process is likely to be more complicated than ordering and paying for fifty lasagnas.
There is more space for misinterpretation and dispute, hence it's necessary to be as specific as you can. But technically, all that is required for a contract to be binding is that both parties have to be in agreement, and things of value (e.g. cash, goods, services) have to be exchanged between the two parties.
Contracts- Keep Them Simple and Make Them Work
When you buy a business you’ll encounter a number of contractual agreements, some of them written and some of them oral. Oral contracts are hard to prove in court, but they are legally binding. You may be able to wriggle out of an oral contract, but it's a very unwise thing to do. Once you have an agreement, stick to it. When you want to buy a business, an oral agreement is often a good way to get things off the ground. This will probably consist of the seller making you an offer. If you respond and accept the seller's offer, the contract is in place and you are bound to buy from her, at the price she offered.
But most likely you will respond with a counteroffer, thus restoring the responsibility of taking the process forward to the seller.
There are a few key things to keep in mind while negotiating, so that you don't find that you have entered into a contractual agreement that you didn't want.
Agreeing To Agree
A contract exists as soon as an agreement is reached. The seller will lay down her terms for the sale, thus leaving it up to the buyer to accept or reject the offer. During the period that the buyer is undecided about the offer, it remains open. If the buyer responds with an enquiry or a counteroffer, essentially a modification on the terms proposed by the seller, there is still no contract.
The Counteroffer
When you buy a business once the seller makes an offer to you, you may make a counteroffer so that it is then up to the seller to take the process forward. In the counteroffer, you can ask for a lower price, more assets, a change in the obligations of the sale etc. It's a politer version of haggling, but with one difference- if the seller accepts your counteroffer then you are obligated to buy.
Expiration of the Offer
Once the seller makes an offer, you are bound to consider it and respond to it. You are entitled to think about it for some time, but to avoid confusion, you should clarify with the seller how long his offer is open. If you want the offer to remain open for a considerably long period of time, say a month or more, then the seller may ask you to pay for the option. During that time the seller cannot make an offer to anyone else. If the expiration of the offer is not discussed once the offer is made, the offer is assumed to remain open for a reasonable amount of time.
As a buyer, the best thing to do would be to accept the offer as soon as possible to avoid any confusion about how long it remains open. But without an explicit discussion of expiration, the offer itself does not constitute an obligation to sell to you.
Amending and Revoking an Offer
If the seller makes you an offer and you don't accept immediately but take some time to think about it, the offer remains open. During this period the seller is entitled to amend or revoke the offer. Once you agree to the conditions of the seller, the contract is in place and the seller may not amend or revoke the offer. Further, the seller cannot amend or revoke the offer if you agree on a specific time period in which you will consider the terms of the offer.
When you buy a business, the best way to avoid disputes later is to put everything down in writing, and not rely on oral agreements. The process of making an offer and responding with a counteroffer is a good way for a buyer and a seller to get to know each other, and be sure that they are both serious, before proceeding to the negotiating table and signing anything.