Sales and Purchase Agreement (SPA)

Sales and Purchase Agreement (SPA)

A Sales and Purchase Agreement (SPA) is a legally binding contract that outlines the terms and conditions of a sale between a buyer and a seller. The SPA serves to protect both parties by clearly detailing the responsibilities, rights, and expectations involved in the transaction.

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Key Components of a Sales and Purchase Agreement

Parties Involved

Full legal names and contact information of the buyer and seller.

Description of the Asset/Item Being Sold

For businesses: assets included, liabilities assumed, intellectual property, etc.

Purchase Price

  • Total amount to be paid.
  • Payment structure: lump sum, instalments, or escrow.

Payment Terms

  • Deadlines and methods (bank transfer, cheque, etc.).
  • Deposits or down payments, if any.
  • Conditions for release of escrow payments (if used).

Closing Date

  • The date when ownership officially transfers from seller to buyer.

Representations and Warranties

  • Assurances from both parties about their legal right to enter the agreement, the condition of the asset, absence of undisclosed liabilities, etc.

Covenants and Obligations

  • Commitments to take or refrain from certain actions before/after the sale (e.g., non-compete clauses, transitional support).

Conditions Precedent

  • Specific conditions that must be met before the transaction is finalised (e.g., regulatory approvals, due diligence).

Indemnities

  • Agreement on how damages, losses, or liabilities will be handled if either party breaches the contract or misrepresents something.

Termination Clauses

  • Conditions under which the agreement can be terminated, and the consequences of termination.

Dispute Resolution

  • Governing law and jurisdiction.
  • Mediation or arbitration clauses, if preferred.

Signatures

  • Both parties must sign and date the agreement.

Optional Add-ons Based on Context

• Confidentiality Clause
• Non-Compete or Non-Solicitation Agreements
• Post-Sale Support or Training
• Inventory Valuations
• Management Accounts
• Statutory Accounts
• Lease Assignments or Subleases if the property is leased

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