Adjustment Clauses: Contract for Real Property are clauses in a real estate purchase agreement that provide for the adjustment of the purchase price based on certain conditions or events that occur between the signing of the contract and the closing of the sale. These clauses are used to ensure that the buyer and seller both get a fair deal by taking into account any additional costs or credits that may arise during the transaction. There are two types of Adjustment Clauses: Contract for Real Property: Final Adjustment Clauses and Interim Adjustment Clauses. Final Adjustment Clauses are clauses that provide for the adjustment of the purchase price at the time of closing. These clauses typically provide that the purchase price will be adjusted based on any outstanding taxes or liens on the property, as well as any changes in the value of the property since the signing of the contract. Interim Adjustment Clauses are clauses that provide for the adjustment of the purchase price prior to the closing of the sale. These clauses typically provide for the adjustment of the purchase price based on any changes in the value of the property since the signing of the contract, as well as any additional costs incurred by either party prior to the closing.
Adjustments Clauses: Contract for Real Property
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FAQ
The Adjustment of Purchase Price clause of an asset purchase agreement provides for the purchase price to be be increased or decreased based on the actual working capital of the acquired business.
A warranty disclaimer ? also called an ?as is? disclaimer ? is a document or statement distributed to inform consumers that a business does not accept liability for issues with their product or services.
A purchase price adjustment mechanism protects the parties from changes in the financial condition through the closing date by adjusting the purchase price paid for the target company up or down against a pre-determined target(s) agreed between the parties.
For example, a seller of a used automobile sells it to a buyer, and puts into the contract of sale the statement: "The buyer accepts the automobile as is, with all faults." Two minutes after the buyer drives off with it, the car stalls, and the engine seizes.
?As is? refers to a term used in sales contracts where the buyer agrees to buy a product in its current condition, without legal recourse should the buyer discover a defect in the product after purchase.
A purchase price adjustment based on the working capital (current assets minus current liabilities) of the target company or business. This is the most common type of purchase price adjustment. Most businesses need a minimum amount of working capital to maintain their operations.
For example, if the target NWC is $1,000,000 but actual working capital at closing is just $700,000, the seller would pay or credit the buyer an additional $300,000 in adjusted purchase price.
Typical post-closing adjustment provisions focus on liabilities and assets of the target company that fluctuate as a result of business operations between the time the parties agree on a purchase price and the actual closing of the transaction, which could be months after the initial agreement on price.
In real estate contracts, there are contract clauses that outline the terms of the agreement and responsibilities of each party. The contract clauses address all aspects of the sale terms and are legally binding once both parties sign the document.