In recent years, business clients have sought to limit the expense and complication of transactions by preparing and negotiating their own documents, then bringing them to the solicitors to finalise or “fatten up”. These documents are referred to as heads of agreement, memoranda of understanding or terms sheets. Ideally, they should set out the understanding between the parties in their own words, without any legal jargon. If so, the documents are a useful way of simplifying the solicitor’s role.

However, problems occur when clients take on the role of the lawyer. This often occurs when clients cut and paste clauses from other agreements, or from standard agreements found on the internet.

It is important that these documents should be used only for the purpose of clarifying the understanding between the parties. Problems occur when they are allowed to take on the greater role constituting legally binding agreements.

It is preferable for heads of agreement to be clearly stated as being intended not to create a legal relationship between the parties, other than for supplemental obligations like confidentiality. Rather than devoting efforts towards negotiating legally binding heads of agreement, it is usually preferable for solicitors to expend that effort on reaching agreement on the formal documentation.

See Heads of agreement.

Once you have determined how the transaction should be structured, you should choose a suitable precedent for the contract. For a simple sale, such as a shop, a standard Law Society precedent is usually ideal. If the sale is more complex, then a more detailed precedent is required.

After the first draft of the contract has been submitted, there is usually a series of negotiations between the solicitors for the parties as to the terms of the contract.

Exchanging marked-up and annotated versions of the agreement is useful and may lead to final agreement on the documentation. If not, it should at least narrow the issues. However, this process should not be allowed to drag on, as this wastes your time and the client's money. It may also lead to bad blood between the parties and the parties walking away from the deal.

If agreement on the form of the contracts cannot be finalized reasonably quickly by email and there are just a few outstanding issues, a teleconference can usually be arranged quickly to finalise agreement on the document. Even though it may be a teleconference with the other side, it is best to have your client with you, as you are at a disadvantage trying to negotiate when you can only communicate with your client by telephone.

The most effective way to finalise the terms of an agreement is a conference attended by all parties and their solicitors. If there are a several technical issues, as well as some commercial issues, it may be useful to have a preliminary conference between the solicitors, to iron out the technical issues, and identify the issues requiring commercial resolution. If the parties and their lawyers meet together, and all genuinely try to resolve the outstanding issues, this is almost always successful. By the time the parties reach this point, it is unlikely that either party wishes to walk away from the deal.

See Preparation of contract.

It is common for a vendor to agree to defer payment of part of the purchase price. The main reasons for this are that the purchaser cannot afford to pay the whole purchase price immediately, or that part of the purchase price is agreed to be calculated on how the business performs, during an agreed period after settlement.

In this case, the vendor will usually require security for the unpaid balance. When the vendor takes security over the business, there are technical issues including the following:

If the security granted by the purchaser includes a charge over shares in the company operating the business, this is usually documented by the purchaser providing a blank transfer of the shares back to the vendor.

This requires a security interest document (formerly known as "bill of sale") to be registered.

This Act exclusively covers security over almost everything other than real property. It has a central, federal registry of all such securities. This includes securities which were registered on the numerous state registries and other federal registries prior to the act coming into force in 2012. Solicitors acting the purchasers and must now carry out a search of the PPS register.

See Vendor finance and earnouts.

The usual procedure for the sale of a business is to exchange contracts, carry out due diligence and other enquiries during the next four to six weeks, then settle.

However, in some circumstances, it is better to exchange contracts and settle the transaction at the same time. The main advantages are:

Many provisions of a normal contract will be unnecessary, such as provisions relating to the deposit and to the conduct of the business pending completion.

The purchaser knows what they are getting and is not exposed to the business being run down by the vendor between exchange and settlement.

The stock take can be carried out immediately before settlement. Accordingly, there will be no need to include or implement contractual provisions for independent valuation of the stock.

By postponing exchange, you postpone the vendor's obligation to pay CGT, and the purchaser's obligation to pay duty (if any).

However, there are disadvantages:

Neither party knows that they have a definite deal until settlement. This means that a vendor will reveal information, and the purchaser will incur expenditure, without the other side being bound to go ahead with the transaction.

It may not fit in with the requirements of a lender. The lender may wish to view an exchanged contract before approving a loan and to see a stamped contract on settlement.

See Simultaneous exchange and settlement.