An Asset Purchase Agreement governs the sale and transfer of specific business assets, detailing what is included, excluded, and how liabilities are handled. This playbook walks through due diligence, valuation considerations, and risk allocation terms essential for a clean transaction.
Why This Matters: Inadequate dispute resolution provisions can lead to costly, time-consuming litigation in unfavorable venues, increasing legal risk and expense.
Negotiation strategy
If you're the Buyer:
Ensure the dispute resolution clause specifies a jurisdiction favorable to the company. Advocate for mediation and arbitration to minimize litigation costs.
If you're the Seller:
Negotiate for a neutral jurisdiction and ensure the inclusion of mediation to avoid lengthy court proceedings. Consider arbitration for binding resolutions.
Essential elements
1
Governing Law
Specifies applicable legal jurisdiction.
2
Jurisdiction
Determines court location for disputes.
3
Arbitration
Outlines binding resolution process.
Action framework
ACCEPT
Propose edits if the jurisdiction is unfamiliar or the dispute resolution method is inefficient.
EDIT
Reject if the clause mandates litigation in an unfavorable jurisdiction.
ADD
Add mediation and arbitration clauses if absent.
PRO TIP
Always specify a jurisdiction that aligns with your company's legal strategy to avoid unexpected legal challenges.
Example clauses
FAVORABLE
Preferred Governing Law
"This Agreement shall be governed by and construed in accordance with the laws of [Chosen Jurisdiction], without regard to its conflict of law principles."
NEUTRAL
Standard Jurisdiction Clause
"Each party agrees to submit to the jurisdiction of the courts of [Neutral Jurisdiction]."
UNFAVORABLE
Unfavorable Jurisdiction
"This Agreement shall be governed by the laws of [Unfavorable Jurisdiction], which may not be familiar to either party."
Fallbacks
Cross-Border Transactions
In cross-border deals, ensure the dispute resolution clause accounts for international arbitration to avoid jurisdictional conflicts.
High-Value Contracts
For high-value contracts, prioritize arbitration to ensure a binding and enforceable resolution process.
Long-Term Partnerships
In long-term partnerships, include mediation to maintain business relationships while resolving disputes amicably.
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WEEK 1
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WEEK 2
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WEEK 3
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WEEK 4
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DocJuris is not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options,selection of forms or strategies.