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Simple English definitions for legal terms
asset purchase agreement
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A quick definition of asset purchase agreement:
An asset purchase agreement is a contract between a seller and a buyer where the seller agrees to sell some or all of their assets to the buyer. The agreement includes details about the sale, such as the price and payment terms, as well as representations and warranties from both parties. It also outlines post-closing obligations, indemnification rules, and termination clauses. Think of it like a special kind of shopping list for businesses!
A more thorough explanation:
An asset purchase agreement is a legal contract between a buyer and a seller. The seller agrees to transfer some or all of the assets of a company to the buyer. This agreement is used when a company wants to sell its assets, but not the entire business.
The agreement includes:
- A description of the transaction
- A list of definitions of the words used in the agreement
- The terms and conditions of the sale, including the purchase price and payment terms
- The closing terms and conditions
- The representations and warranties of the seller and buyer
- Post-closing obligations of the parties
- The indemnification rules
- The termination rules
- Other miscellaneous clauses
For example, if a company wants to sell its manufacturing plant to another company, they would use an asset purchase agreement. The agreement would outline the terms of the sale, including the purchase price and payment terms. It would also include representations and warranties from both parties, such as the legal characteristics of the sold assets. The agreement would also include post-closing obligations, such as a non-compete clause.
An asset purchase agreement is also known as an APA.