Creating an Asset Purchase Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating an asset purchase agreement is an incredibly important part of any business transaction. It protects both the buyer and seller, details all the terms of the transaction - such as price, payment schedule, transfer of ownership and additional clauses - and provides legal protection that ensures both parties understand their rights and obligations. Without a legally-binding agreement in place, the buyer or seller may be at risk should either side fail to deliver on their end. Thus, having assistance from a knowledgeable source is essential for any asset purchase agreement process.

For this reason, many business owners, lawyers and accountants seek advice from experts like Genie AI for help in creating high-quality legal documents without paying a lawyer. As ‘the world’s largest open source legal template library’, Genie AI takes millions of datapoints to teach its artificial intelligence what makes up a market-standard asset purchase agreement. This means those with access to Genie AI’s dataset and community template library can draft and customize agreements that offer real protection against potential risk or issues before signing - all without needing an account with Genie AI itself.

Similarly, it’s wise to have experienced guidance when discussing tax planning strategies as part of the Asset Purchase Agreement process as it can have a significant impact on the buyer’s liabilities come tax time. An expert who fully understands applicable tax laws and regulations can help negotiate any relevant clauses during this phase too; ensuring everything is being negotiated in the best interests of their client.

In conclusion, drafting an Asset Purchase Agreement requires careful consideration from both sides – but with a little help from specialists like Genie AI anyone can easily create high quality documents quickly without having to worry about any hidden risks or ambiguous language in the agreement itself. Read on below for our step-by-step guidance – or visit our website today – if you need further advice on how to use our free templates now!

Definitions (feel free to skip)

1. Asset purchase agreement: A contract between two parties outlining the terms and conditions of the sale of assets from one party to the other.
2. Tangible assets: Physical assets such as real estate, equipment, and machinery.
3. Intangible assets: Non-physical assets such as intellectual property, goodwill, and other assets.
4. Payment options: Different methods of payment, such as paying a portion of the purchase price in advance, or in installments over a period of time.
5. Payment terms: The payment schedule, late payment penalties, and payment method.
6. Obligations: The duties and responsibilities of each party in the agreement.
7. Representations and warranties: Statements made by one party to another, promising that certain conditions are true and can be relied upon.
8. Indemnification: A legal obligation to protect another party against any losses or damages caused by an action of one of the parties.
9. Closing conditions: Requirements that must be met in order for the purchase to be complete.
10. Confidentiality: A provision in the agreement that prohibits the disclosure of confidential information.
11. Dispute resolution: Provisions for resolving disputes in a timely and cost-effective manner.

Contents

• Definition of the assets being purchased
• Type, description, and quantity
• Description of the purchase price
• Amount, currency, payment options
• Payment terms
• Payment schedule, late payment penalties, payment method
• Obligations of the seller
• Delivery of assets, maintenance of records, provision of documents
• Obligations of the buyer
• Acceptance of assets, payment of purchase price
• Representations and warranties
• Warranty of title, warranty of condition, warranty of non-infringement
• Indemnification
• Indemnification by seller of buyer, indemnification by buyer of seller
• Closing conditions
• Delivery of assets, payment of purchase price, compliance with obligations
• Confidentiality
• Non-disclosure of confidential information, return of confidential materials
• Dispute resolution
• Venue, choice of law, arbitration, mediation

Get started

Definition of the assets being purchased

• Identify the assets to be purchased and describe them in detail.
• Include the type of assets, the number of assets to be purchased, and any additional specifications.
• Make sure to include any relevant documents or records that identify the assets.
• All parties should agree to the definition of the assets in order to move forward with the agreement.

Type, description, and quantity

• Create a detailed list of the assets being purchased that includes type, description, and quantity.
• Include all items, even those of small value, to ensure there are no discrepancies.
• Once all assets are listed, check off this step and move on to the next.

Description of the purchase price

• Determine the total purchase price of the asset - this should include all costs associated with the purchase
• Include the details of any financing arrangements in the agreement (e.g. payment plan, loan, etc.)
• Ensure that the purchase price in the agreement is accurate and unambiguous
• Identify any additional costs that the purchaser must pay for, such as taxes, fees, etc.
• Once you have all the details and the purchase price, you can include it in the asset purchase agreement
• Once you have included the purchase price in the agreement, you can check this off your list and move on to the next step.

Amount, currency, payment options

• Establish the amount of the purchase price in a currency that both parties are comfortable with.
• Identify the payment options available for the purchase, such as cash, check, credit card, or other forms of payment.
• Make sure to include complete details in the agreement that specify the payment terms, such as the date of payment, the payment method, and any conditions or restrictions.

You will know that you have completed this step when you have established the amount, currency, and payment options for the purchase and included them in the agreement.

Payment terms

• Decide on the total amount of the purchase and the currency that will be used for payment
• Agree on the payment schedule and timeline for the asset purchase
• Detail any late payment penalties that may apply if payments are not made on time
• Specify the payment method to be used and how payment will be made
• Make sure that all payment terms are clearly outlined and agreed to in the asset purchase agreement

Once you have determined the payment terms and they have been included in the asset purchase agreement, you can move on to the next step of specifying a payment schedule, late payment penalties, and payment method.

Payment schedule, late payment penalties, payment method

• Determine the payment schedule, including the due dates and amounts for each payment.
• Establish any late payment penalties that either party may incur.
• Choose the payment method that both parties agree to use.
• Include a clause requiring the buyer to provide proof of payment, such as a receipt or bank statement.
• Confirm that the payment will be made in full, and not in installments.

You can check this off your list and move on to the next step when you have included all of the necessary details regarding the payment schedule, late payment penalties and payment method in the asset purchase agreement.

Obligations of the seller

• Review applicable laws and regulations for the assets being purchased
• Identify any special characteristics of the assets, such as special warranties or guarantees, that need to be included in the agreement
• Specify any repairs or maintenance that the seller must perform before or after the sale
• Establish who is responsible for the cost of transporting the assets and any fees associated with the transfer of title
• Include any other obligations that the seller has to the buyer regarding the sale, such as providing any necessary documentation or providing training on the assets
• Make sure all obligations are clear and specific and that any contingencies are addressed

You can check this off your list when you have clearly outlined the seller’s obligations and that the parties have agreed to all of the terms.

Delivery of assets, maintenance of records, provision of documents

• Delivery of assets: Seller is obligated to deliver the assets to the buyer in the agreed upon time frame.
• Maintenance of records: Seller must provide accurate records of the assets being transferred to the buyer, including serial numbers, model numbers, etc.
• Provision of documents: Seller is required to provide all pertinent documents related to the assets, such as title documents, warranties, and product registration forms.

When all of these obligations are completed, you can check off this step and move on to the next, which will be the Obligations of the Buyer.

Obligations of the buyer

• Buyer must provide a written notice of acceptance of the assets within 10 business days of delivery
• Buyer is responsible for any taxes, fees, or other costs related to the purchase of the assets
• Buyer must ensure that all legal documents related to the purchase of the assets are in compliance with all applicable laws
• Buyer is responsible for any and all maintenance and upkeep of the purchased assets

You can check this off your list once you have provided written notice of acceptance, paid all applicable taxes, fees, and/or other costs related to the purchase, submitted any necessary legal documents, and ensured that all necessary maintenance and upkeep of the assets is being completed.

Acceptance of assets, payment of purchase price

• Agree on the assets that are being purchased
• Determine the purchase price for the assets
• Receive payment for the purchase price of the assets
• Issue a receipt for the payment of the assets

Once all of the above steps have been completed, you can check this off your list and move on to the next step.

Representations and warranties

• Make sure that all representations and warranties of the seller are clearly stated in the agreement
• Include the seller’s representations and warranties about the assets and their condition
• Have the seller represent that they have the right to transfer ownership of the asset
• Make sure that the agreement includes the seller’s warranties of title, condition, and non-infringement
• Have the seller warrant that they have disclosed all material facts known to them related to the assets
• Ensure that the agreement includes the seller’s warranties of no liens or encumbrances

You can check this step off your list and move on to the next step when all of the representations and warranties of the seller have been included in the agreement.

Warranty of title, warranty of condition, warranty of non-infringement

• Clarify who is the seller and who is the buyer
• Specify that title or ownership of the asset is being transferred
• Explain the warranties made by the seller, such as warranty of title (i.e., the seller has the right to pass on the title of the asset), warranty of condition (i.e., the asset is free of any liens or encumbrances), warranty of non-infringement (i.e., the asset does not infringe upon any other party’s intellectual property rights)
• Define any exceptions to the warranties (e.g., the seller cannot guarantee that the asset is free from undisclosed defects)
• Outline any remedies the buyer may have if the warranties are not met
• When the above steps are completed, you can check this step off the list and move on to the next step of the process: Indemnification.

Indemnification

• Understand what indemnification is, and how it relates to the purchase agreement.
• Draft language to protect both buyer and seller from any damages or losses resulting from the purchase agreement.
• Make sure to include language that requires the indemnified party to provide notice of any claims.
• Include details of any exclusions from the indemnification clause.
• Get input from legal counsel on the indemnification clause, to make sure it is drafted properly.
• Finalize the indemnification clause and include it in the purchase agreement.

Once you have completed the indemnification clause, you can move on to the next step.

Indemnification by seller of buyer, indemnification by buyer of seller

• Seller should be required to indemnify the buyer against any claims arising out of the seller’s ownership or use of the assets, including any liabilities or obligations related to the assets before the closing date.
• Buyer should be required to indemnify the seller against any claims arising out of the buyer’s ownership or use of the assets, including any liabilities or obligations related to the assets after the closing date.
• Make sure that the indemnification provisions are reasonable in scope and duration.
• Once the indemnification provisions are in place, this step can be checked off the list and the next step can be addressed.

Closing conditions

• Review the Purchase Agreement to ensure that all closing conditions have been satisfied
• Understand the timeline for closing and the parties’ rights and obligations in the event of a delay
• Determine whether there are any contingencies that need to be satisfied before the closing date
• Identify any documents or other closing conditions that must be satisfied
• Ensure that any conditions are met in a timely manner and that all required documents are ready for the closing
• When all the documents have been signed and all closing conditions have been met, the parties may proceed with closing the transaction.

Delivery of assets, payment of purchase price, compliance with obligations

• Seller will deliver the assets to the purchaser on the closing date.
• Purchaser will pay the purchase price to the seller on the closing date.
• Both parties will comply with their respective obligations under the purchase agreement.
• Upon completion of the delivery of the assets and payment of the purchase price, the purchaser and seller will execute all necessary closing documents.
• When the delivery of the assets and payment of the purchase price has been completed, both parties will have fulfilled their obligations, and can move on to the next step of the purchase agreement.

Confidentiality

• Confirm that the Buyer and Seller have signed an existing confidentiality agreement at the beginning of the transaction.
• Ensure that all parties acknowledge their obligations to protect any confidential information disclosed during the transaction.
• Agree that the parties shall use confidential information only for the purpose of completing the transaction.
• Outline the Seller’s obligations to return or destroy any confidential information provided by the Buyer.
• Specify that the Buyer and Seller shall not disclose any confidential information to third parties without the other party’s written consent.

When this step is complete, you should have an agreement that outlines the confidentiality of the information provided by each party during the transaction.

Non-disclosure of confidential information, return of confidential materials

• Draft and include a clause that binds the parties in agreeing not to disclose confidential information to any third party.
• Ensure that the clause includes an agreement that the parties will return all confidential materials obtained during the transaction.
• Agree on the timeframe for the return of these confidential materials to ensure that the confidential information is not kept any longer than necessary.
• Include the definition of “confidential information” in the clause to ensure that all parties are aware of what information is to remain confidential.
• When finished, review completed clause to ensure that all aspects of the agreement are met.

Once all of the above bullet points are completed, you will have finished this step and can move on to the next step, ## Dispute resolution.

Dispute resolution

• Draft a dispute resolution clause that describes how disputes will be handled in the event of a disagreement.
• Ensure that the clause includes the venue, choice of law, arbitration, and mediation information.
• When the dispute resolution clause is completed, this step can be checked off your list and you can move on to the next step.

Venue, choice of law, arbitration, mediation

• Determine the venue of any disputes - the state and court system where any disputes will be settled
• Decide on the choice of law - the state law that governs the agreement
• Include a dispute resolution clause - this clause should include arbitration and/or mediation terms so the parties can resolve any disputes without going to court
• Determine the specifics of the dispute resolution clause - specify the arbitration procedure to be used, the governing law for the arbitration, the location of the arbitration, and the cost of the arbitration
• Include a clause that states the agreement is the full and complete agreement and any prior agreements are superseded
• When all of the above steps are complete, you can check this off your list and move on to the next step!

FAQ:

Q: What are the differences between an Asset Purchase Agreement and an Asset Transfer Agreement?

Asked by Bob on February 25, 2022.
A: An Asset Purchase Agreement is essentially a contract which outlines the terms and conditions for the purchase of assets from one person to another. An Asset Transfer Agreement outlines the transfer of ownership of assets from one person to another, and is usually used when a business is undergoing a restructuring.

Both agreements will include details such as a description of the assets being sold/transferred, the transfer price, warranties, indemnity obligations, and any other special provisions or liabilities. The main distinction between an Asset Purchase Agreement and an Asset Transfer Agreement is that in an Asset Purchase Agreement, the seller is transferring title to the assets in exchange for payment, whereas in an Asset Transfer Agreement, title does not change hands.

Q: What are some common clauses in an Asset Purchase Agreement?

Asked by Kayla on August 10, 2022.
A: Common clauses in an Asset Purchase Agreement include those related to warranties and indemnities, assignment of intellectual property rights, representation and warranties, restrictive covenants, tax matters, governing law and jurisdiction, price adjustments, closing conditions and termination rights.

The warranties and indemnities clause typically outlines any promises made by the seller that the buyer believes are important or necessary in order to protect them from future loss or damages as a result of the transaction. The assignment of intellectual property rights clause describes any intellectual property rights that are assigned to the buyer along with the assets being purchased. Representation and warranty clauses outline any promises or statements made by one party to another regarding the assets being purchased. Restrictive covenants are legally enforceable promises between two parties that restrict certain activities by either party after a transaction has been completed.

Tax matters cover any taxes incurred in relation to the transaction such as capital gains tax or stamp duty. The governing law and jurisdiction clause outlines which country’s laws will apply in case of disputes arising from the agreement. Price adjustments outline any changes to prices due to external factors such as changes in market conditions or exchange rates. Closing conditions cover what needs to happen for a transaction to be completed such as obtaining third party consent or satisfying certain conditions. Finally, termination rights outline what happens if either party wants to end the agreement before it has been fully executed.

Q: Are there any specific considerations I should make when creating an Asset Purchase Agreement?

Asked by David on June 7, 2022.
A: When creating an Asset Purchase Agreement it is important to consider all of the potential risks associated with the transaction such as liabilities arising from warranties given by either party or tax implications of the sale or transfer of assets. It is also important to consider any specific requirements imposed by industry regulations or governing laws which may affect how the agreement is structured or drafted. Additionally, you should consider whether you need additional protection for intellectual property rights (such as trade marks), or if there are restrictions on how you can use certain assets after they have been transferred (such as restrictions on reselling). Finally, you should make sure that all parties have fully understood all aspects of the agreement before signing it off so that there is no room for misunderstanding or dispute down the line.

Example dispute

Suing for Breach of Asset Purchase Agreement

• Plaintiff must first show that an asset purchase agreement was entered into between the parties.
• The Plaintiff must also provide evidence that the Defendant failed to fulfill the obligations under the asset purchase agreement.
• The Plaintiff must demonstrate that the Defendant’s failure to fulfill the obligations caused the Plaintiff to suffer damages.
• The Plaintiff must prove that the damages were directly caused by the Defendant’s breach of the asset purchase agreement.
• The Plaintiff must also show that the damages can be quantified in terms of money or other assets.
• The Plaintiff can seek either compensatory damages, which are meant to compensate for the losses incurred, or punitive damages, which are meant to punish the Defendant for their breach of the agreement.
• Settlement can be reached through negotiation or mediation, or a court may issue a ruling if the parties are unable to come to an agreement.

Templates available (free to use)

Asset Purchase Agreement
Asset Purchase Agreement Ip And It Warranties
Covid 19 Warranties For Asset Purchase Agreements
Ip Rights Asssignment In Asset Purchase Agreement
Sellers Deed Of Guarantee Under Asset Purchase Agreement
Short Form Asset Purchase Agreement Limited Companies
Simple Asset Purchase Agreement Immediate Completion
Stock And Asset Purchase Agreement
Tupe Employee Provisions For Asset Purchase Agreement

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