Sale and Purchase Agreements

Course Overview

A “good deal” is a function of both the terms under which an exchange of contracts takes place and the price paid or received on completion of a sale and purchase agreement. A high price is no good to a seller if a large portion of the proceeds of sale needs subsequently to be handed back to a buyer in order to compensate for breaches of warranty. Similarly, a low price is not particularly advantageous to a buyer if the assets acquired prove to be subject to unexpected defects for which no redress is enforceable against the seller.

The drafting of a sale and purchase agreement seeks to ensure that a buyer receives what was anticipated and that a seller can walk away with confidence that its continuing liabilities are both known and quantifiable. As a compromise between these two extremes, the drafting of warranties and indemnities identifies the risks in a deal and decides upon whom they should fall.

Course Content

Structure of a Sale & Purchase agreement

• Parties, interpretation and definitions
• Comfort Letters & Side Letters
• Letters of Intent & Heads of Agreement
• Pre-conditions & covenants
• Exchange & delayed completion
• Boilerplate clauses
• Schedules

Representations, warranties and indemnities

• Drafting objectives
• Purpose and scope of warranties
• Transfer and re-transfer of risk
• Warranties given by the seller
• Warranties given by the buyer
• Long Form & Short Form warranties
• Purpose of indemnities
• Tax warranties & indemnities

Completion meetings

• Management of the meeting
• Solicitors’ undertakings
• Timing problems

Warrantors & covenantors

• Who should give warranties?
  • Executive shareholders
  • Management buyouts
  • Receivers & administrators
  • Listed companies

Disclosure

• Reasons for disclosure
• Warrant the Disclosure Letter or due diligence reports?
• General & specific disclosures
• Fair disclosure
• Deliberate non disclosure

Effect of the warranties

• Breach of warranty
  • Misrepresentation
  • Rescission
  • Damages
  • Interregnum provisions
• Buyer extends remedies
  • Widening the meaning
  • Defining a warranty
  • Management accounts
  • Joint & several liability
  • Implied warranties as to title
• Seller limits & excludes liability
  • Narrowing the meaning
  • Unexpected benefits
  • References to statutes
  • Limitation periods
  • Floors & ceilings
  • Pursuit of debtors
  • Conduct of claims

Completion accounts

• Comparison to audited accounts
• When and why they are used
• Advantages & disadvantages
• Principal mechanisms
• Limiting areas of potential dispute
• Locked box transactions as an alternative
• Completion

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.