This document is an optional clause which can be inserted into a business sale agreement.

When purchasing stock as part of the sale of business, the purchaser should, to the extent possible, be satisfied that he or she will take unencumbered title of the stock on completion of the sale. This has an implication for the purchase price payable for the stock as well.

Therefore, the vendor would need to satisfy the purchaser that he or she has full title to the stock prior to completion of the sale, and that any rights that third party suppliers or creditors may have over the stock will be removed.

Using this precedent

This precedent clause is a condition precedent which can be used in a sale of business agreement. It can also be inserted into the “conditions precedent” schedule of the separate precedent “Business sale agreement – sale of assets (short form)”.

When inserting this optional clause into an agreement, care must be taken to ensure that the agreement remains consistent. Cross-references, definitions and schedules should all be checked.

This document has been authored for LexisNexis by Jeremy Kriewaldt, Partner, Atanaskovic Hartnell and Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editor Murray Landis, Partner, K&L Gates.