The establishment of a standard form contract can be advantageous in managing how the corporation wants to sell its asset.  The normal process would have the buyer preparing their form of contract for review and negotiation of the transaction with the seller.  This allows the buyer to set the basic terms of the contract as it best fits their need and provides them with a better initial negotiating position.

If the seller establishes a standard form contract the form of the transaction can be controlled by the seller providing the following advantages:

  1. Basic legal requirements meet the seller’s needs, establishing:
    1. Definition of Property;
    2. Establish receipt of Purchase Price and Deposits;
    3. Select Seller’s preferred Title Company and define Title report and Exceptions;
    4. Set timing and activities for Contingency Period;
    5. Define Conditions Precedent;
    6. Set acceptable Representations, Warranties and Covenants for both Buyer and Seller;
    7. Define Closing requirements;
    8. Establish Termination Process and Liquidated Damages;
    9. Provide Entry Rules, Disclosure information and Indemnification position for Environmental, health and safety issues;
    10. Provide information on Leases or other contracts the affect the Property;
    11. Provide and establish Corporate Authority being provided;
    12. Establish rules for Assignment by both Buyer and Seller.
  2. Letter of Intent communicates price and exceptions to standard.
  3. All offers can be evaluated faster and compared against standard.
  4. Corporate law department only needs to be involved with exceptions to standard, improving turn around time and minimizing effort.

 

Because basic legal terms are standard, only specific requirements that are different than the standard or are additional requirements need be addressed, again, providing a more controlled process that minimizes the evaluation and approval time required for responding and negotiating the Buyer’s offer.

-Rick Leighton

 

Rick Leighton is Senior Vice President-Corporate Services at NAI Global.