Before discussing the different aspects of the purchase agreements, it is important to clarify what a purchase agreement is. Essentially, a purchase agreement is an agreement between two companies to purchase a certain amount of goods or property, based on parameters set forth in the purchase contract. One of the most important aspects of a purchase contract is an offer document, which serves as a formal invitation for a tender to engage in negotiations regarding the acquisition of specific items or property. The tender document is typically required to include a detailed description of the items to be offered for sale and the price that is offered for them. This can also be referred to as a bid and is often used as the primary tool for negotiating a price in a transaction.
A second aspect to consider is that of a due diligence examination, or “DDE.” A due diligence examination, in the context of a company purchase agreement, refers to the process by which an individual or entity who has an interest in purchasing the property actually visits the business to evaluate it. An example might be a real estate investor who has acquired a lot of commercial property and is looking for suitable investment properties to purchase and develop into income generating properties. The investor might conduct an inspection, review the building and surrounding area for viability for development, and/or hire the services of a structural engineer or architect to inspect the interior of the building and to look at the plumbing and electrical systems.
In most cases, a buyer will agree to purchase the property under the following terms and conditions: a contract will be signed by the buyer and the seller and the company will enter into a due diligence agreement. The term “due diligence” refers to the fact that the buyer and seller are obligated to examine the property with respect to its condition. Specifically, under the terms of a due diligence contract, the company is obligated to: prepare a report describing the condition of the property; obtain financing from a third party; hire an independent inspector or appraiser; and make all repairs necessary to the condition of the property. A company is also obligated to submit periodic reports to the seller and to provide relevant information to the seller in connection with the property. Each report is a separate agreement between the company and the seller. A company purchase contract should be drafted carefully to avoid confusion.
In addition, a company purchase agreement may contain a default trigger. This means that if the buyer of the property does not close on time or within a specific number of days, the seller will be required to submit a deed of credit to the buyer to satisfy the purchase price. In this case, the default trigger would trigger if the buyer of the property did not close on time. In most cases, the amount of time for default triggers is three days. However, it can be increased as provided in the agreement.
Company purchase contracts should be drafted with careful consideration to the various risks associated with it. A number of these risks involve potential obligations to the lender, lenders, and borrowers. A company purchase agreement should include a provision for a potential obligation to extend credit to the buyer in the event that the contract is not executed properly. To mitigate this risk, it is recommended that the company purchase contracts are drafted with careful consideration to various aspects such as the amount of interest that would be charged on the debt to be repaid by the buyer, the time period in which the contract would be enforceable, and the amount of credit that would be extended to the buyer by the lending company.
The drafting of a company purchase agreement should be done only after thorough consideration of all the risks associated with the transactions. First, one should consider the legal costs involved in the transactions. The due diligence examination of buyers should be performed by a lawyer. This is because the due diligence examination is used to determine whether the deal is free of all defects. An attorney should also review the documentation that is usually submitted in a transaction to ensure that all the necessary information has been provided.
Drafting of purchase agreements should also include a review of the purchase price that is presented in the offer to purchase the property. If there are inadequate provisions in the contract that spells out the purchase price, this could create a potential issue during the due diligence examination. The buyer should be able to determine an acceptable range with regard to the expected purchase price. Furthermore, the documents should have a provision that requires the seller to provide a cashier’s check for the full purchase price if there is a dispute between the buyer and seller on the amount of money that was paid in advance. This provision can be very useful if the documents include a dispute that has arisen from the amount of time it took to pay for the property.
The buyer may have questions regarding the drafting of purchase contracts. For example, questions could be raised as to whether it is mandatory for the lender to perform a credit check on the borrower. If the lender fails to perform a credit check, or does not have reasonable cause to do so, the lender may be liable for the entirety of the debt accrued by the borrower under the mortgage.