These items contain insurance and guarantees that the seller makes to the buyer, and vice versa. Representations and guarantees are promises that a party makes on itself, business and assets. It is these promises from the seller that drive the buyer to buy the assets. In large agreements, representatives and guarantees can cover dozens of pages. In small stores, lawyers can often reduce the provisions of this item, but the chances are high that whatever the purchase price, you still have a large number of representations and guarantees that the seller is invited to make. In this regard, the parties include other mini-agreements related to the APA. For example, the seller and its owners may stick to or promise not to compete with the business for a period of years after closing. Similarly, the seller`s owners may agree to act as consultants for a short period of time to facilitate the transition of assets from seller to buyer. The specific agreements contained in this article are very different depending on the size of the transaction and the type of transaction acquired. The oil and gas industry does not distinguish between an asset and the purchase of shares when it designates its corresponding sales contract. In this sector, whether it is the purchase of assets or shares, the final agreement is called the Purchase and Sale Contract (PSA). Purchasing assets allows buyers to divide the purchase price between the assets to reflect their market value. This increases depreciation deductions that result in future tax savings.
You may be tempted to skip these definitions. Because who doesn`t know what “tax” means? But resist this urge: these defined terms are essential to the content of the agreement. If you fall asleep somewhere between “code” and “naked,” try treating the definition article like a dictionary: read the other parts of the APA first, and if you see a term basically, go back to the definitions to learn the meaning. Just take care not to assume that you know what a word means based on its common meaning of use. It is important to determine exactly what is purchased. Assets transferred under an asset sale contract may include: a buyer will normally prefer to buy the assets of a business, while the seller prefers to sell the shares.