Commercial Law Article - Importance of Obtaining Advice Before Signing a Commercial Contract for the Purchase of a Business
This article comes from the Commercial law team at Hatzis Lawyers Brisbane
When running a business a person may require numerous licences and permits for the conduct of their business.
The standard REIQ Business Contract provides certain warranties that a seller of a business may provide but does not properly cover all situations and it is these difficult situations that may create legal problems and expensive legal costs.
Recently the Queensland Court of Appeal had to deal with a decision dealing with some of these potential issues under the standard Contract. The Council provided a permit for a Trade Waste Approval to enable a restaurant business to be run. This approval could not be transferred or assigned.
A condition of the approval was that a "new arrestor required". Cost of installing the grease arrestor would have been in excess of $10,000.00.
The Council officer indicated that it would have been difficult or almost impossible to install one on these particular premises. The Council issued a non-compliance charge of $1,200.00 per annum as the grease arrestor had not been installed.
The purchasers attempted to withdraw from the Contract on the basis that the compliance requirements of a new arrestor had not been complied with. The Court eventually held that they could not withdraw because Council's policy of allowing a non-compliance monetary penalty to be applied prevented them from doing so.
If the Council reversed its policy and required the arrestor then there is always the potential that the business could not be run and the person purchasing would lose all their money as they would have no business to sell.
The prudent commercial law solicitor would, prior to you signing the Contract, be in a position to explain the shortfalls of the standard REIQ Contract and provide a special condition so that such a situation did not arise and if searches revealed such a situation you could validly withdraw from the Contract.
The commercial litigation both at first instance and in the Court of Appeal would have cost the purchasers in excess of $30,000.00 and more like $50,000.00.
At the end not only did they lose the case they also were ordered to pay damages of $75,000.00. A very expensive exercise over a matter that one can believe the purchasers would have been very concerned about in the first place.
Do not get caught. The cheapest part of any legal transaction is at the beginning - not at the end.
Contact our Brisbane Commercial law team on (07) 3345 4388 or e-mail commercial@hatzis.com.au for further information.
Autor: Frank Dzelalija, Commercial Law Solicitor,Hatzis Lawyers
Hatzis Lawyers are a dynamic firm of Brisbane lawyers and solicitors contributing their might to the smart state of Queensland.