Sample Contract Language

simple asset purchase agreement

I uploaded a simple asset purchase agreement to Docracy and thought I’d share it here. I drafted it with very small businesses in mind.

It’s structured as a bill of sale and assumption agreement to make it easy for do-it-yourselfers to use (in many cases there’ll be no need for a separate bill of sale, it doesn’t require closing certificates, and it’s otherwise largely a fill-in-the-blank document). Although it’s always best to have a professional help with important legal issues, most people do these deals without a safety net, so it makes sense to provide documents that’ll increase their chances of documenting their deals adequately.

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Last week I posted a sample contract and asked for feedback. I’ve made a few changes, most of which are in response to reader comments. You can see the changes in this redline, and here’s a quick recap:

1. Simplified price clause. Section 1 provided that “the Buyer shall pay any manufacturer’s tax, retailer’s occupation tax, use tax, sales tax, excise tax, value-added tax, duty, customs agent or broker fees, inspection or testing fees, freight costs, insurance, or any other tax, fee, or charge of any nature imposed on, in connection with, or measured by the transaction contemplated by this agreement in addition to the prices set forth on Exhibit A.” It bothered me to include such a list in simplified “Minimum Effective Legal Protection” contract. Ultimately, I decided that the list covered three areas: taxes, export expenses, and third-party expenses. Since the form is only meant for domestic transactions, export expenses don’t apply. I revised the sentence to read: “the Buyer shall pay all taxes and third-party expenses imposed on, in connection with, or measured by the transaction contemplated by this agreement in addition to the prices set forth on Exhibit A.” It doubtless needs more work, but I think it’s an improvement. [click to continue…]

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I’ve downloaded a couple of precedent contracts over the past few months from the crowd-sourced contract application Docracy for use in my legal practice. When I needed a simple contract for the sale of goods today, I checked in to see what was available. Finding no such agreement, I decided to finally make a contribution. You can see my handiwork here.

Several weeks ago I explored the idea of minimum effective legal protection in my post Considering a Contract’s Legal-Battle Rating. The gist is that in any given situation there’s a minimum level of legal protection that a contract — or a clause — should provide. Falling below that level leaves a party overly exposed to business and legal risks. When I drafted the sample I contributed to Docracy, I sought to achieve a seller-friendly MELP version of a simple business-to-business contract for the sale of goods to be used when there’s no special reason to think that the agreement will be litigated.

I’ve inserted the sample agreement below. What do you think? Would the document provide effective protection for a low-stakes run-of-the-mill B2B sale of goods, or have I omitted a clause that would leave my sale-side client unduly exposed? Is there any dead weight I could throw overboard?

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People often come to the blog looking for a sample liquidated damages clause. Although I have a nice little piece explaining liquidated damages provisions and cautioning people to avoid including penalty provisions in their contracts, I haven’t provided sample language.

Liquidated damages clauses should be tailored to the specific situation — this is particularly important because courts won’t enforce penalty provisions. Thus, it’s important that (1) your clause not in fact be a penalty provision and (2) the liquidated damages clause clearly reflect an attempt to compensate the non-breaching party.

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Earlier this year I wrote Can the Crowd Produce a Decent Contract? in response to some back and forth between Ken Adams and Bill Carleton about the topic on their blogs. In the comments to my post, Ken expressed skepticism, but another comment, by Max Mednik, suggests that crowd-sourcing can “up-vote” contracts with the best quality contract language.

Up-voting contract language. Now that sounds interesting. So I’d like to try an experiment in up-voting. Quora seems like a good platform to invite people to submit contract language for the crowd to vote on, so I’ve done just that. If you’d like to play, click on this link to go to my question “What’s the best anti-assignment provision in a contract ever?” and drop in a suggested clause. Then we’ll let the crowd decide whether it has the chops to be the best ever.

I’ve already taken the plunge and submitted a provision (which, truth be told, is probably lifted from Tina Stark’s awesome work, Negotiating and Drafting Contract Boilerplate). At least do me a solid and give me a jump on the competition!

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