Contract negotiation, exchange and settlement

>Contract negotiation, exchange and settlement
Contract negotiation, exchange and settlement2019-09-06T16:30:44+10:00

Acting for vendors and purchasers in a range of industries in Newcastle, Sydney and Australia wide.

The sale of business contract is usually drafted by the lawyer representing the vendor. It is essential that the contract correctly documents the deal stuck by the vendor and purchaser, and meets the expectations of the parties. If both parties are satisfied with the agreement, they will sign and exchange contract counterparts. Usually there is then a period between exchange and settlement so both parties can prepare for the transition.

At Butlers Business Lawyers, we act for vendors and purchasers in a range of industries all over Australia. If you need a lawyer to assist you in your sale of business transaction, call us on (02) 4929 7002 to discuss your sale or purchase of a business, or email us at enquiries@butlers.net.au.

 Negotiation of sale

Once the initial contract is drafted, the parties usually fine tune the terms of this agreement. While the vendor and purchaser may already have agreed on the key terms of the transaction before the contract was prepared, the parties usually need to negotiate the nuances of the written agreement. Contract negotiations can be complicated and stressful for both parties. Without adequate advice, it is easy to misunderstand the meaning of contractual provisions, or miss key risks in the transaction. For this reason, it is best if both parties are legally represented. Solicitors can help vendors and purchasers to navigate the contract, avoid unnecessary risks, and understand the legal risks inherent in the business they are purchasing.

 Exchange of contracts

Once both the vendor and purchaser are satisfied with the contract (and are still willing to enter into the transaction), they will sign the contract. Usually, each party will sign a counterpart, which is an identical copy of the contract. The contract is ‘exchanged’ when the parties swap signed counterpart contracts. From exchange, the parties are legally bound to perform the transaction in accordance with the contract. The purchaser will also pay the deposit on exchange, which is typically 10% of the purchaser price.

 Contract settlement or completion

The sale of a business ‘settles’ or ‘completes’ when the transaction is finalised under the contract. Settlement is often set at least a few weeks after the contract is exchanged. This allows both parties to prepare for the handover of the business.

Before settlement, the purchaser will usually make offers of employment to any staff of the business that they wish to employ. The parties will also agree on adjustment calculations, which will depend on the provisions for adjustments in the contract. Often the purchase price will be adjusted for entitlements of transferring employees, and pre-payments for expenses such as rent.

The remainder of the adjusted purchase price is due on settlement. If stock needs to be valued, this will usually happen the day before or day of settlement. At settlement, the vendor will need to hand over the business, equipment and important documentation.

Our team acts for vendors and purchasers from drafting and negotiating the contract to settlement. We can also assist you with related matters, such as leasing, intellectual property, and employment law. If you need a lawyer to assist you in your sale of business transaction, call us on (02) 4929 7002 for an obligation free chat, or email us at enquiries@butlers.net.au.

Testimonials

“Butlers prepared standard contracts for every-day use in our business. The team ensured that the contracts complied with Australian Consumer Law and advised on best practices for PPSR registration. Their experience and knowledge in this complicated area was invaluable, and we feel that our business now has the best protection from expensive legal disputes.”

Sam

Related Articles

Want to talk to one of our experienced commercial lawyers? Call us on (02) 4929 7002, email us or complete an enquiry form.

Do NOT follow this link or you will be banned from the site!