When buying or selling a business, it is important to recognize that the Purchase Agreement is a very flexible instrument allowing the parties a great deal of latitude regarding how to structure the transaction as well with respect to the representations, warranties, disclosures and covenants that the parties incorporate in the Agreement. There are a number of standard provisions in a purchase agreement, including (to name just a few) those relating to legal ownership of/title to the assets, representations as to the corporate status and authority, disclosures as to litigation, financial and tax related representations, environmental issues and post closing obligations. While these representations, warranties and covenants are standard, they should be not be glossed over. Even a slight variation in language can alter the meaning and scope of these sections, and thus all representations, warranties and covenants, no matter how standard, need to be reviewed carefully. In addition, there are a number of terms which are often overlooked but the parties, esepcially the buyer, should consider incorporating in the Purchase Agreement. This Article examines key representations, warranties and covenants that require particular focus when drafting a stock or asset purchase agreement.
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Legal Issues When Buying a Business: Don't Overlook These Provisions in the Purchase Agreement