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Contingencies in Business Sales:
Generally, when selling a business or the assets thereof, the transaction is contingent upon certain events. Contingencies must either be satisfied or waived to proceed with the deal. Typical contingencies include a (1) loan contingency to ensure that the buyer's lender will fund on the deal, (2) due diligence contingency to ensure the assets and business/practice records are satisfactory, (3) lease contingency to secure a new lease or lease assignment in the buyer's name, (4) lien contingency to ensure the assets transfer free and clear on the Closing Date, and (5) a contingency to provide the parties with the ability to terminate the transaction if they cannot agree on the terms of an asset purchase agreement.
Before entering into any type of service contract with any type of vendor such as equipment or sales companies, make sure the contract is governed by the laws of the State of California. Most of these types of contracts have hidden provisions, typically on the back side of the page locking you into bizarre state laws from states like Texas or Louisiana. Since you are in California, the contracts you enter into should be governed by California law so you do not have to pursue your rights in some other state. As you can imagine, this can be a serious problem especially if the vendor has breached the contract. Even if a proposed service contract names a non-California venue, you should be able to negotiate and switch the venue to California law. For more information on this topic or to have service contract reviewed, please contact us!
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