Why Do You Need a Buy Sell Agreement Lawyer

Why Do You Need a Buy Sell Agreement Lawyer

Buy Sell Agreements

Buy Sell Agreement Lawyer

Why Do You Need a Buy Sell Agreement Lawyer?

If you are building a business while you form a partnership, you will need help from a  buy sell agreement lawyer. Signing a buy sell agreement with the partner will protect you from unexpected situations and legal issues. That is why a buy sell agreement lawyer can make an agreement that will protect both parties.

A buy sell agreement claims your rights when it comes to difficult situations. Your partner can fall ill or become unable to operate the business the right way. In that case, a buy sell agreement lowers your financial risks of bankrupt or debt. You can protect yourself by signing an agreement that will keep your business intact.

Comparing a buy sell agreement with a prenuptial agreement is the most accurate comparison. In a prenuptial agreement, you can get out of the marriage under certain conditions. At the same time, you can protect your financial operations. A buy sell agreement offers the same rights, just with one small difference. In a buy sell agreement, you can cover all the financial transactions between the business partners. This makes a buy sell agreement more reliable and more effective in terms of financial stability.

Speaking about two common forms of agreements, we can separate the contracts into:

  • Cross-purchase agreement, and
  • Redemption agreement
A cross-purchase agreement happens when the remaining owners decide to purchase the shares of the business that is for sale. In this matter, it is important to know that the mechanism relies on a life insurance policy.

A redemption agreement is another form of a buy sell agreement. Here, we have a situation when the business entity buys the shares of the business. With a redemption agreement, the contract limits the ability of business owners to sell or transfer their ownership stakes in the business.

Both the cross-purchase agreement and redemption agreement are part of the possible contacts between the business owners, and they can mix the two in their business buy sell agreement. The importance of a buy sell agreement covers most of the financial risks that may occur in the business.

How to Know If a Buy Sell Agreement Is Right for Me

If you plan to start a business with a partner, a buy sell agreement can offer many protective points that can change your business perspective. Many life situations are inevitable and we can rely on this kind of contract when the official regulations are necessary for business operations. Your business partner may go ill or die, and that is when a buy sell agreement comes into effect. Your business capital will be protected and you can continue all the future business operations.

Cross-purchase buy and sell agreements contribute to the rights of the business owners. As a remaining business owner, you can buy the interests of the selling owner. This applies when a selling owner is no longer capable of maintaining their business obligations. Buy and sell agreements are also important in the method of determining the overall business value at the beginning of the business as well as when one of the business owners remains the only owner.

Careful drafting of a buy sell agreement can also eliminate or lower any potential estate taxes that apply at your death. In the situation when you want to pass your ownership interest to one of your family members at your death, avoiding the estate tax is one of the possible outcomes.

Do I Need a Buy Sell Agreement Lawyer?

A buy sell agreement lawyer is necessary if you want to avoid state taxes and protect your business capital and operations. With a buy sell agreement, you will be able to buy shares of the business and prolong your business perspective.

A good buy sell agreement lawyer can help you draft the buy sell agreement that protects both your business partner’s interests and your interests. You will have the right to continue the business operations even in the case of illness or death of your partner. It is possible to stay protected and define a new business strategy with a buy sell agreement. A good buy and sell lawyer can help you craft and improve the right contract that protects you in the case of inevitable circumstances.

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What to Know about Good Faith or Bad Faith – an illustrated easy guide

What to Know about Good Faith or Bad Faith – an illustrated easy guide

Good Faith Is Business

What Does Good Faith Mean?

good faith

good faith

The implied covenant of good faith and fair dealing is implied in every contract.  The implied covenant of good faith and fair dealing is what makes business work.  It requires people to deal with one another fairly.  Businesses and people can trust each other to enter into contracts because good faith requires them to help them get the benefit of their bargain.

Attorney Thomas Howard has helped clients for years enforce their rights under contracts.  And each and everyone of those contracts had something in common – but it was not a term written into any of the contracts.  Our business attorney have helped countless clients with their contracts, below he explains good faith in an easy to understand and Illustrated way.   You can call him at (309) 740-4033.

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The Duty of Good Faith & Fair Dealings

Any party to a contract has an unwritten duty to help the other party obtain the benefit of their end of the bargain.  A benefit of the bargain is what you get out of the deal.  Let’s take a quick second to explain the very basics of what forms a contract.

A contract had 3 basic elements

Contract Basics Offer Consideration Acceptance

  • Offer & Acceptance: This is what you buy. Pizza, coffee, plumbing, Netflix, or even legal services.  The offer is what the seller in the contract brings to the table.  It brings the buyer in the door.  The Buyer is accepting the offer.
  • Consideration: This is often money.  In the picture, the coffee is $3.50.  The consideration is two-way, however.  The offer is a consideration as well.  The pizza is half the deal, so is the NetFlix subscription.  Very often the consideration is goods or services in exchange for payment of money.
  • Meeting of the Minds: This is the most complex of the three basic contract elements, and where Good Faith resides.  The intent of the parties to the contact is important. Both intended to get what is called the “benefit of their bargain.” This means you do not get tricked into the deal. You are not making a mistake regarding the terms of the contract.

Meeting of the Minds and Good Faith

Would you enter into a deal to buy a house if you knew every time it rains the basement floods with 3 feet of water?  Perhaps you would if you negotiate a discount for installing a dewatering system.

But would you buy the house with the leaky basement if you did not know about it?  That’s where people get into trouble because they feel as if they are tricked. 

They lacked the requisite meeting of the minds on the deal because if the buyer knew about the basement flooding, he never would have purchased the house.  That is a lack of meeting of the minds that gets to the heart of contract formation.

What if the seller knows about the water in the basement, and lies on the disclosures and says that to the best of his knowledge there is no water in the basement? 

That is fraud, a/k/a bad faith.  The Seller lying about the leaky basement injured the Buyer.  The Buyer can sue the seller for fraud and recover the damages.  The damages would be the cost of repairing the leaky basement.

Interference in the Contract – Bad Faith

The “duty of good faith and fair dealing requires the party vested with contractual discretion not to injure other parties to the contract by action or omission and not to act inconsistently with other parties’ rights.” Id, citing Brzozowski v. Northern Trust Co., 248 Ill.App.3d 95 (1993).

Sometimes contracts have certain rights that may spring into effect.  These are called contingencies. For example, take your employer’s stock price.

Imagine your job has a contract to that will pay you a bonus if you do a great job and the stock price rises above $100.  If that happens, your employer will pay you one-million dollars.

one million dollars

You have 3 months to get the stock price above $100, and you’re doing amazing!  But your company does not want to pay you. They notice that your contract requires their help. 

Instead of helping you maximize profits, the company sits back and waits and takes no action. If the company does not do their part, you will fail and not get your bonus.

The duty of good faith and fair dealing requires the company to help you hit your target when they must cooperate to do so. The company cannot interfere, not help, and put you in a position to fail, then say you did not earn your bonus. 

That is performing the contract opportunistically to deprive you of your one million dollars.

Good Faith Case Law Round up

  1. A party cannot take advantage of a condition precedent the performance of which he has helped render impossible. Barrows v. Maco, Inc., 94 Ill.App.3d 959, 966 (1st 1981).
  2. Bad faith, or opportunistic advantage-taking, is the lack of cooperation depriving the other contracting party of his reasonable expectation. Hentze v. Unverfehrt, 237 Ill. App.3d 606,(1992).
  3. A party that participated in the hinderance of the condition, and they may not now claim the benefit of the failure of the required event. Yale Development Co. v. Oak Park Trust & Savings Bank, 26 Ill.App.3d 1015 (2nd 1975).

Good Faith Means You Do What You Promised

To conclude, good faith helps our economy have trust in the trillions of dollars of contracts that we depend on in our daily lives. 

As the American Bar Association said in their blog,

The theory behind this principle is that a party cannot interfere with or fail to cooperate with your performance and then complain about it.

From the pension funds, to pizza orders, and everything in between, all depend on good faith and fair dealing in their contracts.

So if you ever get the advice to take a dive, or to not perform your end of the bargain – you may have to explain to the person that you have a duty of good faith and fair dealing to live up to your end of the bargain.

You may also want to avoid doing business with them. 

If you have a contract dispute, call our offices at (309) 740-4033.

 

Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.

R. Martindale

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What does Good Faith mean?| Good faith is for business| Tom Howard

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