Does Your Purchase Agreement Meet the Test?
Friday, September 30, 2011 at 4:33PM If your purchase agreement can pass the test, your client will reap the benefit
September 25, 2011
By: Stephen J. Nash
Nash Law Firm
nash@nash-law.com
Purchase agreements are drafted every day that, frankly, are not very good. When a problem comes up and it is sent to me to be reviewed, I’m often faced with a purchase agreement that makes a bad situation worse. The terms are unclear. There is nothing in the purchase agreement that deals with the problem.
Instead of the purchase agreement helping solve the problem it actually becomes another hurdle that must be overcome.
The following two part test is one that can help you determine if your purchase agreement is going to help or become a hurdle if a problem arises.
The Neighbor Test
The “neighbor Test” is really quite simple – if you gave your purchase agreement to the neighbor across the street (who is not a lawyer or real estate professional), can they read the purchase agreement and tell you what the deal is?
If you have to explain the deal or fill-in the details, your purchase agreement is incomplete. If the neighbor gets part of the deal wrong, your purchase agreement is unclear.
Some might say that the “Neighbor Test” is flawed because “they don’t understand real estate”. My response is that if there is a dispute, the judge or jury is more like the neighbor than a real estate professional. If they do not understand the purchase agreement without explanation or you have to supply terms are missing, your odds of winning just decreased.
The What If Test
A good purchase agreement anticipates problems. Let’s face it, if everything goes smoothly you don’t need to rely on the purchase agreement. But when things don’t go as planned, the purchase agreement is the best way to make sure that the problem can be dealt with in a way that benefits your client.
The trick is anticipating what might go wrong. After-all, it is impossible to draft a remedy if you aren’t aware of the of the problem. The easiest way I know to anticipate possible problems is to ask yourself, “What would happen if the following happened?” Think of everything that might go wrong and see if your purchase agreement deals the situation. If not, it needs to.
Conclusion
The time to determine whether your purchase agreement is a good one is before it is signed and a problem arises. Don’t worry about making a longer purchase agreement. While everyone wants a short agreement, the reality is that they keep getting longer for a reason – every time a new problem arises, we say, “Never again” and deal with it in the purchase agreement. Your clients will appreciate it if a problem arises and I am able to tell them that their purchase agreement puts them in a better position to resolve the problem in their favor.
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NOTICE The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract is, or can be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney competent in the field of practice relevant to your situation. Copyright 2011 Nash Law Firm |