Purchase Agreements

Independent Legal Advice (“ILA”) refers to legal advice given by a lawyer who is not involved in the transaction with the client. ILA is usually required by lenders and other sophisticated parties who want to ensure that their clients are fully informed of the content and consequences of a transaction. ILA should be obtained by any person who is self represented and who is involved in a transaction where all, or some, of the parties are represented by the same lawyer.

The Purchase Agreement documents the final terms of the agreement between the seller (vendor) and the buyer (purchaser). After signature by both parties, it is binding and the terms thereof can only be changed by written agreement of the parties.

Independent Legal Advice must be obtained as early as possible, even before any formal legal steps are started.

The Purchase Agreement usually deals with the following:

• Specific definitions and terms associated with the transaction
• The parties
• The purchase price and payment terms
• Whether it is a share or asset purchase agreement
• Deposits, hold-backs and right of set-off
• Escrow arrangements
• Vendor and purchaser representations and warranties
• Vendor and Purchaser covenants
• Vendor’s and purchaser’s conditions of closing
• Closing date, time and place
• Closing documents required from both parties
• Non-dompetition and restrictive covenant arrangements
• Any further terms applicable to the transaction

Yes, it is.

When there is a Purchase Agreement in place, it is binding on the parties. When one party backs out, there are usually terms that allow the other party to enforce their rights. The agreement usually contains the remedies of the aggrieved party (contractual remedies) or they can rely on the common law or the law of equity. Whatever the case may be, the agreement is in writing and the terms thereof are fixed.

If there is no Purchase Agreement, there is no written record of the agreement between the parties. This does not mean the oral agreement is not binding or enforceable, but the exact terms thereof will be very difficult to prove. A Purchase Agreement is essential when purchasing or selling a business.