Home Q&A Forum Can I assign rights in a business purchase agreement?

Acquisitions

Business Purchase Agreement

California

Asked on Oct 19, 2023

Can I assign rights in a business purchase agreement?

I am in the process of purchasing a business and I am considering assigning some of my rights under the purchase agreement to a third party. I would like to know if this is allowed under the law and what the potential risks or consequences might be. I am also interested in understanding the steps that need to be taken to ensure that all parties are adequately protected under the agreement.

Answers from 1 Lawyer

Answer

Acquisitions

California

Answered 873 days ago

The general rule is that contracts may be freely assigned to third parties. However, most agreements have clauses that limit or prohibit assignment unless the non-assigning party agrees to the assignment.

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Is a business purchase agreement binding?

I am interested in purchasing a business and I am currently in the process of negotiating a business purchase agreement. I am curious to know if the agreement is binding and what legal implications it may have if I decide to move forward with the purchase. I have read through the agreement and I understand the terms and conditions, however, I would like to know if the agreement is legally binding.

5.0 (39)

David B.

Answered Nov 25, 2023

It seems that you are thinking of signing a letter of intent. A letter of intent ("LOI") is normally used to summarize the key points of a deal upon which the parties have reached an understanding. It is a prelude to a full set of agreements used to purchase a business. After the LOI is signed, the parties negotiate the minutiae of a deal and prepare the final set of agreement. LOIs usually contain a statement that the LOI does not bind either party to move forward with a deal. For the most part this is true. However, case law is replete with cases where the LOI was enforced against an unwilling party despite the disclaimer in the LOI. Generally speaking, courts will enforce an LOI where one party did not act in good faith after the LOI was signed, refused to negotiate or signed the LOI for nefarious purposes. A person contemplating an LOI should not assume that language saying the agreement is not binding will clear them of all responsibility. There is a duty to negotiate in good faith.

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Acquisitions

Business Purchase Agreement

California

Asked on Oct 15, 2023

Who signs the business purchase agreement?

I am looking to purchase an existing business and am currently in the process of negotiating a business purchase agreement. I am not sure who is responsible for signing the agreement and would like to know who needs to sign in order for the agreement to be legally binding. I am hoping to get some clarification on this matter so that I can move forward with the purchase.

5.0 (39)

David B.

Answered Nov 21, 2023

The short (but not very helpful) answer is: a person that is authorized by the business to bind the business. So, if the business being acquired in a corporation, it would likely be the CEO. During due diligence, the business being acquired should disclose that information and provide a copy of the minutes of a meeting of the Board of Directors showing that such person has been duly authorized. Occasionally, the CEO will sign an agreement stating that she has been duly authorized and is personally liable, and if she isn't she will be personally responsible for the problems tha arise. That being said, each deal is different depending on the facts. First, what type of entity is being acquired? Is it a corporation or LLC or partnership or something else? Second, what was done by the entity to vest authority in the person that will sign the acquisition agreement? Underlying all of this is the need to ensure that the seller is telling the truth. You may want to contact the department of corporation in your state to ensure that the entity has been duly registered, is current on all of its filing and verify that the person signing the agreement is listed on the paperwork.

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Acquisitions

Business Purchase Agreement

California

Asked on Oct 19, 2023

What's an earn-out in a business purchase agreement?

I am looking to purchase a business and the seller has proposed an earn-out as part of the purchase agreement. I am unfamiliar with this type of agreement and need advice on how it works and what I need to consider before agreeing to it. I would like to understand what an earn-out entails and the potential risks and rewards associated with it.

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James H.

Answered Nov 3, 2023

For informational purposes, NOT legal advice: In some service businesses, where there is not hard property asset value but the company is making money, an agreement called "earnout" allows the seller to continue working as part of the compensation. For example, a consulting company may have ongoing business that is dependent on the seller being involved, due to familiarity and personal loyalty. These agreements differ from seller financing in that the seller's employment is subject to continued business volume, therefore the buyer has some assurance that the seller (and their friends, co-workers, relatives,etc.) do NOT try to divert the existing customer revenue stream to a different business with similar services. Yes, some sellers cleverly attempt to sell their business and then set up a competitor in their kids, spouse or relative name to recapture the revenue and tiptoe over the non-compete seller clause In these situations the buyer may offer a Earnout to protect their interest and insure the revenue keeps coming in while the new owners learn the detalls and customer base. Other situations where "Earnout" may be preferable include business sales where the subject business is a subcontractor or heavily dependent on one or a small few number of clients, which makes the business revenue stream highly subject to rapid change. Buyers should be careful not to pay for a company AND then also do a "earnout" since that would be paying twice.

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Business Contracts

Business Purchase Agreement

California

Asked on Oct 18, 2023

Can a business purchase agreement be verbal?

I am in the process of purchasing a business and am currently in negotiations with the seller. I am trying to understand the legal requirements for a business purchase agreement. Can a business purchase agreement be verbal or does it need to be in writing? I'm looking for clarification on this as I want to ensure that all parties involved are legally protected.

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5.0 (7)

Brian W.

Answered Nov 14, 2023

Business purchase agreements need to be in writing. It will protect you and each party. Let me know if you need assistance in drafting the agreement.

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Contracts

Business Purchase Agreement

Florida

Asked on Jul 15, 2025

What are the key elements to include in a Business Purchase Agreement?

I am in the process of purchasing a small business and I am in need of legal advice regarding the essential components that should be included in a Business Purchase Agreement. The business has been operating for several years and has a stable customer base, but I want to ensure that all aspects of the purchase are properly addressed and legally protected. I would like to understand the necessary clauses, warranties, and conditions that should be included in the agreement to safeguard my interests and mitigate potential risks involved in the transaction.

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Ralph S.

Answered Jul 25, 2025

Please post this as a project attorneys can bid on. It would be hard to give you a generalized answer without knowing the details and trying to piecemeal it can do more harm than good. But I would definitely think about what is being sold/when/ how. How is the payments made? What IP is included, when does ownership transfers, is there financing, are there any licenses required, any documents that need to be executed, any inspections, due diligence etc

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Can I assign rights in a business purchase agreement?

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