sale of business contract

What do I need to include in my sale of business contract?

Selling your business can be a complicated and stressful process. However, a well-drafted sale of business contract is key to a smooth transaction. This article outlines some main considerations for your sale agreement to help you sell your business with ease.


1. What are the commercial details?

Your sale of business contract must clearly set out the commercial details of the transaction. This includes things like vendor and purchaser details, any guarantors, the purchase price, settlement date, and the assets included within the sale. Importantly, you should consider whether things like trading stock or property fixtures form part of the sale or remain separate from the transaction.


2. Are there any conditions to sale?

The sale transaction may be conditional upon certain things, and these should be detailed in your sale of business contract. For example, sale may be subject to the purchaser obtaining finance or receiving a client list prior to settlement.  Sale conditions can be difficult to negotiate, so it is important to seek professional legal advice on specific conditions you wish to include.


3. Are there any restraints of trade?

A restraint of trade clause prevents the vendor from competing with the purchaser’s business or soliciting clients, customers, suppliers or employees from the purchaser. Restraint of trade clauses restrict the vendor in a certain area and/or for a specified time period. For example, the seller may be prevented from operating a similar business as the purchaser in Australia within 12 months from the sale.


Importantly, restraint of trade clauses cannot go further than necessary to protect the legitimate businessinterests of the purchaser. Such clauses will be unenforceable and void. You may need a legal professional to review your sale of business contract if you are unsure about the enforceability of certain clauses.


4. What will happen to the employees?

Your sale of business contract should address whether employees are transferred or terminated because of the sale. In some cases, parties may agree that existing employees must interview again to continue employment under the new business.


Importantly, sellers must comply with their obligations under the Fair Work Act 2009 (Cth) when dealing with employees. This means honouring any employee entitlements such as sick leave, annual leave and flexible working arrangements. If employees are not transferred to the new business, they may also be entitled to redundancy pay.


5. What happens to your intellectual property?

The role of intellectual property can be easily overlooked in sale of business contracts. Intellectual property rights include your trade marks, phone numbers, copyright, social media accounts, designs and patents. Your sale of business contract should clearly set out who retains ownership of these rights, and whether they are transferred or licenced as part of the sale.


Key takeaways

  • Sale of business contracts should include all the commercial details of the transaction, any conditions of sale, and clauses relating to existing employees and intellectual property.
  • Restraint of trade clauses must not go further than necessary to protect the business interests of the purchaser, otherwise they will be void and unenforceable.


Gladwin Legal are experts in advising businesses, from start-ups to established companies. If you require assistance with sale or purchase of business, including drafting or reviewing agreements, please contact us at or 1300 033 934.