Asset Purchase Agreements & Breach of Contracts
Whether it’s a high stakes merger and acquisition, a major asset or real estate purchase, or an order for more coffee filters – it’s a contract, in a sense. Though we may not define certain purchases as such (i.e. buying coffee filters), these three situations all satisfy the basic principles of a legally enforceable agreement. That is, two parties agree to do something in exchange for something else. If you pay someone for coffee filters and they promise to deliver them to you, that’s an agreement.
Unfortunately, some things don’t go as planned. While the coffee filter company not following through with their promise to send you the coffee filters you paid for may be a minor inconvenience, other failures to meet the terms of an agreement (a breach of contract) can have major consequences.
As attorneys who practice business litigation, our team at Hendershot, Cowart & Hisey, P.C. sees many different types of contract breaches involving many different parties, from business to business (or vendor) agreements to business to customer, business to employee, or partner to shareholder. When it comes to asset purchase agreements, we know how to protect the rights of clients, prevent or mitigate damages, and seek remedies when another party fails to meet their promise.
What Is An Asset Purchase Agreement?
As Asset Purchase Agreement (APA) is a written document that solidifies an agreement between a buyer and a seller. Purchase agreements may not be necessary for coffee filters, but they should be used in any transaction of significance to outline and finalize terms and conditions for:
- The purchase and sale of tangible assets, such as real property or equipment and machinery
- The purchase and sale of intangible assets like stocks and shares or intellectual property
- The use of legal instruments to facilitate a partial transfer of assets, such as am assignment and assumption agreement (for contracts or permits) or a bill of sale (for personal property)
- The assumption or avoidance of liabilities related to an asset, such as taxes, assumed contracts, or employment
While asset purchase agreements offer flexibility to selectively acquire certain assets, and potentially avoid certain liabilities, they also create exposure to potential risks, and will be of critical importance should the contract be breached. As such, structuring sound agreements in accordance to your specific goals and interests is a task that demands the attention of experienced business lawyers.
Breach of Purchase Agreement
A breach of contract occurs when either the seller or the buyer fails to meet the promise they make, or more specifically, the terms of the contract. For wronged parties to bring a valid claim, there must be:
- A promise (valid purchase agreement);
- A major failure to perform a contractual obligation (material breach); and
- Consequences resulting from the failure to fulfil an obligation (damages).
A breach of purchase agreement can involve any number of situations, but must be material in nature. If a seller misses a delivery date but the customer still receives what they purchased with little resulting damage, they may have the ability to negotiate a discount on future orders, but generally won’t have a valid claim because the basics of the contract were fulfilled. If the failure of that delivery caused the buyer to miss an important deadline and lose out on anticipated business or the loss of new business, however, such a situation would constitute a breach of the purchase agreement.
Protecting Your Interests, Winning the Case
Asset purchase agreements are in many ways critical safeguards against what can be steep potential losses, particularly in mergers and acquisitions or other high stakes purchases. As such, it becomes crucial to work with experienced attorneys to protect your interests proactively when drafting, reviewing, and negotiating any agreement.
After a breach has occurred, the wronged property has the right to be “made hole” by taking legal action. A responsive strategy for winning a contract breach case, depend on the individual facts of a case and the available remedies, such as:
- Damages, including restitution for any incurred costs, reliance interest, or actual / expectation damages
- Liquidated or stipulated damages agreed upon in the original contract
- Quantum meruit for the value of performed services benefiting the other party
- Equitable remedies, including, recession, specific performance, reformation, or an injunction
Founded in 1987, Hendershot, Cowart & Hisey, P.C. is a Houston-based business law and business litigation law firm serving counties throughout the state of Texas. If you have questions about purchase agreements, breach of contract, or other related matters, call (713) 909-7323 to speak with a member of our team.