What is a purchase agreement and how to prepare one.

Key elements of a purchase agreement.

Every deal is different, but most purchase agreements include a familiar core set of components. Use the list below as a reference during drafting and review.

1. Parties and authority to contract. Name each party precisely and confirm authority to enter into the agreement. Capture roles for signatories and any required approvals.

2. Asset or business description. Define exactly what is being transferred, including inclusions, exclusions, and condition at transfer. Reference schedules where helpful.

3. Consideration and payment terms. State price, deposits, timing, milestones, and method of payment. When price construction is relevant, reference a fixed‑price contract for context.

4. Representations and warranties. Summarize what each party asserts as true at signing and, if applicable, at closing. Tie any updates to conditions or termination rights.

5. Covenants. Specify actions parties must take between signing and closing, including required filings, third‑party notices, and access to information.

6. Closing conditions. List what must be true or delivered at closing, such as approvals, consents, financing, deliverables, and absence of material adverse changes.

7. Risk allocation. Define remedies and limits, including indemnification structure, caps, baskets, and dispute resolution mechanics. Clarify governing law and venue.

8. Deliverables and schedules. Attach schedules and exhibits for assets, liabilities, transition services, or other details too lengthy for the main body.

9. Term, termination, and survival. Explain when obligations begin and end, which provisions survive closing, and how the parties may end the agreement before closing.

10. Signature and execution format. Capture signatories, execution mechanics, and whether the contracts may use electronic signatures.

Some agreements also clarify whether pre‑signing documents were intended to be binding vs non‑binding contracts. When parties compare structures, clarifying concepts like a unilateral contract can help align expectations for obligations.

Can you write up your own purchase agreement? Many small transactions begin with a company template assembled internally. Doing so can be effective when the scope is narrow and risks are well understood. For complex transactions or situations with regulatory or industry nuance, draft with counsel or route in‑house drafts to counsel for review. At minimum, ensure stakeholders in finance, operations, procurement, and security confirm accuracy and feasibility of the terms.

Purchase agreement contingencies.

Contingencies are provisions that must be satisfied or waived before the parties close. They protect buyers and sellers by clarifying what must happen between signing and closing and create structured exit ramps if critical assumptions change. The right mix depends on the asset, industry, and regulatory context.

Common contingencies include:

1. Financing contingencies where the buyer's obligations depend on securing funding under defined terms and timelines.

2. Inspections and appraisals that confirm condition, value, or compliance of the asset or business.

3. Regulatory approvals including antitrust, industry licensing, or other government clearances.

4. Third‑party consents from lenders, landlords, key customers, or suppliers when contracts require consent to assign or transfer.

5. Title or ownership verification to ensure clean transfer of the asset or equity free of undisclosed encumbrances.

6. Documentation delivery such as transition services agreements, bills of sale, or post‑closing support terms.

7. Absence of material adverse change between signing and closing where the scope is defined and objectively measurable.

If contingencies are not satisfied or waived by their deadlines, either party may have a right to terminate under specified conditions. If a party fails to meet obligations without an applicable contingency or termination right, the other party's remedies will depend on the risk allocation and remedies section. Clear drafting of contingencies and termination procedures reduces disputes and speeds resolution.

When industry context matters, reference specialized practices to inform drafting. For example, a construction contract illustrates how industry‑specific schedules, inspections, and change procedures can be adapted to a purchase agreement's contingency structure.