Are you interested in buying property or business? Not sure what a due diligence clause is? Or how a due diligence clause can help you?
In this video John Gallagher, solicitor from Argon Law provides the information you need know about due diligence clauses or read more below.
Understanding Due Diligence Clauses in Property and Business Transactions
Are you considering purchasing a specific property or business, but feel hesitant due to lack of information? Fear that another buyer might snap it up before you make your decision can add to the pressure. Fortunately, there is a strategic solution to navigate this situation—a due diligence clause in your purchase contract. Here’s a closer look at how this clause can work to your advantage.
What is a Due Diligence Clause?
A due diligence clause is a provision in a contract that allows the buyer to conduct a thorough investigation of the asset in question before fully committing to the purchase. This clause essentially secures the buyer’s right to buy the asset while they continue their assessments and provides an option to withdraw if the findings are not satisfactory.
Advantages of Due Diligence Clauses
The key benefit of including a due diligence clause in a contract is that it gives the buyer time to ensure the asset meets their needs without the risk of losing it to another party. This can be particularly useful in competitive markets or when the asset involves significant investment or potential risks.
Negotiating a Due Diligence Clause
Not all sellers will be open to agreeing to a due diligence clause. It often depends on the attractiveness of the offer, including the price and other terms. Yet, in many cases, particularly for high-value transactions, sellers find it reasonable to accommodate due diligence clauses.
Key Considerations for Drafting a Due Diligence Clause
When drafting a due diligence clause, several factors need careful consideration:
- Access Rights: What level of access will the buyer have to the asset and related information?
- Seller Obligations: What responsibilities does the seller have to provide information?
- Timeframe: How much time does the buyer have to conduct due diligence and make a final decision?
It’s important for buyers to consult with their legal representatives to ensure the clause is crafted to protect their interests adequately.
If you are navigating a potential purchase of a property or business, consider the strategic use of a due diligence clause to provide peace of mind and legal safeguards. At Argon Law, we specialise in helping our clients understand and negotiate such clauses. If you have any queries about contracts for the sale of real estate or businesses, or other aspects of due diligence, feel free to reach out. We're here to help you make informed decisions.
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