The promise must summarise all of the sale elements.
The promise must be able to be used as a basis for a definitive sales contract.
It can take two forms:
- The unilateral sales promise (commitment of one of the parties)
- The bilateral or preliminary sales promise (reciprocal commitment of the parties)
• Why have a promise?
Simply because during discussions and price negotiations, it is easier to consider all of the documents and information produced by the seller as valid and reliable.
After the protocol has been signed, the potential buyer will be able to control or have collected information confirmed by a specialised firm.
The agreement is almost always assorted:
- Conditions precedent, relating to necessary authorisations and approval for business practice and also to obtaining loans.
- Payment of a amount, which in general corresponds to 5-10% of the transaction, by way of compensation for detention.
To avoid fees for both parties and particularly to avoid certain buyers coming “just to see”, it is possible at this stage to penalise the party responsible for an unwarrented break down in discussions.
The agreement must therefore be very precise on all points of the sale.
Any break in discussions at this stage will be detrimental to the company being sold.
The Promise
