Buying and selling creates the world economy. Most of us are probably not in the league of mega-corporations or the uber-rich. We simply survive buying and selling smaller products and small companies. We try to maximize the money in our pockets by shaving down unnecessary costs. One such cost savings is creating out own Purchase and Sale Agreements. After all, you don’t need all that useless language the attorneys put in there. You know what you need. Or do you?
Purchase and Sale Agreement for Business
Let’s use as an example, a Florist shop named Pretty Peddles in a strip mall. The Owner would like to sell the business and creates her own Purchase and Sale Agreement. It simply states “Owner sells to Buyer for $35,000 all rights, title and interest in Pretty Peddles. Closing will be held next Tuesday. This deal is for cash only.” The Buyer was happy because it says exactly what he wants.
But here’s what the Buyer did not know. The day after the Closing, the Seller went right across the street, into another strip mall, and opened another Florist shop. She called it Patty’s Peddles. She then called up her previous clients to tell them she opened a new Florist shop right across the street. She then contacted her former employee, known throughout the town as the best flower arranger ever, with an offer of more money to come work for her across the street. Can she do it?
Look at the contract. All it says is the Buyer is getting the “rights, title and interest” in Pretty Peddles. Both parties saw this language in a similar contract and it sounded real legal. But was it enough to protect both parties.
Things to Look Out For
A Purchase and Sale Agreement is more than just the transfer of the tangible parts of a business, such as the display window and office desk. It also includes the intangible parts, such as the good will of the name in the community and the right to keep the previous owner away from the customers. Knowing what the previous Owner of Pretty Peddles was going to do, let us take a look at our sample Purchase and Sale Agreement:
– You now see the Purchase and Sale Agreement needed a non-compete clause. Non-compete agreements are binding if they are reasonable. If both parties agree on a time and distance for non-competition, then it is reasonable. An attorney can help you determine what is reasonable.
– You also see the Purchase and Sale Agreement needed a non-solicitation clause involving clients. What good is buying a business if the previous owner can contact the clients and recommend they go somewhere else?
– You also see the Purchase and Sale Agreement needed a non-solicitation clause involving employees. If the workers are what make the company great, why give the previous owner an opportunity to influence them to leave.
Image the cost in business that Pretty Peddles has lost because Patty’s Peddles was opened. Would it have cost less money and been less stressful had the new Buyer hired an attorney to draft a Purchase and Sale Agreement?
Disclaimer
* The name “Pretty Peddles” and “Patty’s Peddles” have not been registered in the state of Florida. There was no intention to use the name of an existing business.
** This blog does not intend to give legal advice. Before proceeding with any legal actions, you should consult an attorney.