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When you are purchasing goods or services, you may have a bill of sale or receipt that memorializes what was provided and paid in return. However, for more advanced sales transactions, you will likely need a more advanced and complex contract. This is known as a purchase and sale agreement, and it is common in transactions involving the exchange of real estate, stock, or complex assets. There may be different names for this type of contract but, overall, it refers to any in-depth agreement defining the terms and conditions of a high stakes transaction.
You always want to have an experienced contract drafting lawyer help to negotiate the terms of a contract and set out the agreement in writing. Having the right legal professional draft your agreement can ensure your rights are protected and that the agreement is in line with Texas laws regarding sales contracts. If you need a purchase and sale agreement for a specific transaction in the Houston area, contact The Weisblatt Law Firm as soon as possible for assistance.
Like any type of business contract, a purchase and sale agreement must have specific provisions to govern a transaction. The basics of the agreement may include:
Keep in mind that the above are only the basic provisions of this type of contract. Depending on the type of transaction and the situations of the parties, there can—and should be—many additional provisions tailored specifically to the sale at hand.
For example, a purchase and sale agreement is often used for real estate sales. In this situation, the contract should state whether the buyer has the opportunity to set up a professional inspection of the property. If so, the contract should also set out the buyer’s rights if the inspection reveals undisclosed defects or does not meet expectations. The buyer may be able to negotiate a lower price, demand the seller fix the defects, or even end the contract, depending on what the purchase and sale agreement allows.
The agreement should also address earnest money or deposits required by the buyer and how those funds will be handled during the transaction and what will happen to the funds if the deal falls through. Additionally, many real estate purchase agreements include contingency clauses stating the deal will only go through if the buyer is approved for financing. These are only some of the many, many terms that you may want to include in your purchase and sale agreement.
You should never use boilerplate or standard contracts as a purchase and sale agreement. Every agreement should be carefully drafted to address all of the specific issues that may arise in this particular transaction. If you fail to do so, you may face unnecessary liability or losses in the event the contract falls through.
For example, part of the agreement should include any guarantees or warranties that the seller provides. If you are a seller and you accidentally over-promise regarding the state of the property, you can face legal action by a buyer who claims you included false misrepresentations in the contract. On the other hand, if you are a buyer and fail to include certain rights and options in the contract, you may be left with unexpected defects or problems and have little right to take legal action. These are only some of many examples of how an inadequate purchase and sale agreement can be costly to either the buyer or the seller.
In addition, a purchase and sale agreement is usually a “living” contract. This means that the parties may continually negotiate and adjust the terms of the agreement while the transaction is pending, often based on new information that arises. If you are purchasing ownership interests in another company, due diligence may uncover some less-than-desirable details of the state of the business. While this may not cancel the whole transaction, it may result in you wanting to negotiate a lower price or add in other guarantees or conditions for the sale. You should have an attorney who can constantly help you negotiate and adjust terms during the transaction until the time of closing.
You should also discuss with your lawyer how you want the agreement to govern legal disputes. You may not want the other party to be able to run into court every time they are unhappy with an aspect of the transaction. There are many considerations for dispute resolution in purchase and sale agreements, including:
Not only can your attorney provide advice on preferrable dispute resolution provisions, but they can also ensure the agreement properly reflects your wishes.
If two parties cannot reach an agreement regarding one or more terms, it should not jeopardize the entire transaction and sale. Instead, a skilled lawyer can help you negotiate with the other party to find middle ground on which you both benefit from the terms of the agreement.
Many complex business transactions are far too important with too much on the line to risk not having an air-tight contract and ensuring there are no terms that go against your interests. At the Weisblatt Law Firm, business attorney Andrew Weisblatt drafts and negotiates highly intricate contracts that govern high-stakes transactions for all types of business and corporate clients. To discuss how he can help you, call (713) 352-0847 or contact the office online to schedule your free 15-minute phone consultation.