Throughout the course of your dealings with the seller or their representatives, they will make certain representations to you that support their business sale proposal. And some of these representations may somewhat stretch the concept of honesty.
For whatever motive, those representations (and even warranties) are made to make the business sound attractive to you, the seller. These may involve responses to questions that you or your representatives ask. You need to note these representations.
Representations can influence your decision to buy the business. They are the informal undocumented components that sit alongside the fancy brochures and well-presented documents to influence a sale. So just like the written word in the material provided to you, the spoken word has the same weighting and should be documented and agreed to.
If you don't, then you run the risk of unsubstantiated representations being disregarded in the event of a future dispute.
You need to consider, where possible, the inclusion of those representations into the buy/sell agreement. Getting sign off on representations will ensure that they at least have some basis of validity and believability.
Further, you have a chance to action those representations by having them form part of the due diligence process.
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