In the course of negotiating the sale of your hospitality business, you’ll be disclosing information about the business to the buyer. That’s through:
- Buyer’s due diligence (which will look through the business’s financials, accounts and contracts)
- Vendor’s statement/Section 52 statement (if required)
- Warranties in the contract of sale
- Any business forecasts or business plans
- Conversations between you and the buyer (a particularly fraught area as it may come down to an argument over what was in fact said)
The buyer will probably keep all of those promises, representations and warranties in mind when deciding to buy your hospitality business. If any of the information is false or misleading, there’s a clear risk that the buyer will take a swipe and seek to sue you for damages. That’s even if the business is failing because of the incompetence of the buyer.
The lawyer’s way of dealing with this is to list those warranties, promises and representations which the buyer is permitted to rely on. Any others are excluded. The seller wants this list to be as short as possible. The buyer wants the list as long as possible.
This restricts the number of reasons to buyer can complain to the seller about (a.k.a. sue the seller over).
Even if there’s something the buyer wants to point to, a dispute resolution clause can save on legal fees of a court battle. It requires the parties to head to mediation before any court proceedings start.