If more specific risks are identified during due diligence, it is likely that they will be covered by appropriate set-off in the sales contract in which the seller promises to reimburse the buyer for compensatable liability on a book-by-pound basis. Some states require the addition of a sales and use tax to the purchase price of the personal property sold. Be sure to indicate in your purchase and sale contract who is responsible for these taxes. Once concluded, the sales contract remains an important document as a reference, as it covers how an earn-out should operate and contains restrictive agreements, confidentiality obligations, warranties and indemnifications, all of which can remain highly relevant. In the simplest form of a sale in which a business for sale is entirely owned by a single person or parent company and is purchased by a single buyer, there are only two parties to the agreement. However, other parties may be involved, for example if several shareholders of the company are sold. In these cases, each of the shareholders must conclude the sales contract to sell their shares. The buyer will want to prevent the seller from creating a new competitive activity affecting the value of the business for sale. The sales contract therefore contains restrictive agreements that prevent the seller (for a fixed period and in certain geographical regions) from recruiting existing customers, suppliers or employees and, in general, from competing with the company for sale. These restrictive agreements must be reasonable in terms of geography, scope and duration. Otherwise, they may infringe competition law.
Explicit warranties: An explicit warranty is a confirmation statement by the seller about the quality and characteristics of the goods. An example of an express warranty is an electronics dispenser that tells a customer, “We guarantee your newly purchased TV against defects for three years. If you draw our attention to a defect, we will replace or repair it. However, an explicit warranty can be established even if the seller does not intend to create one. If the sales contract contains a description of the goods on which the buyer relies when purchasing, an explicit guarantee is made that the goods correspond to this description. When the seller makes available to the buyer a model of the goods, an explicit guarantee is made that the goods conform to the model. A written agreement allows both the seller and the buyer to clearly indicate the explicit warranties that apply, if any, to the goods. . . .