An agreement of sale constitutes the terms and conditions of sale of a property by the seller to the buyer. These terms and conditions include the amount at which it is to be sold and the future date of full payment. Being an important document in the sale transaction, it enables the process of sale to go through without any hurdles. All the terms and conditions included in the agreement of sale must be understood thoroughly by both the parties and obeyed throughout the sale process till the time the sale deed is made. Agreement of sale is the base document on which the sale deed is drafted.
1) Upon the death or disability of the owner, a ready-and-willing buyer is obligated to purchase shares at a fixed price or formula. Absent such an agreement, the estate or the disabled owner may be forced to sell the business at a bargain-basement price.
2) The buy sell provides a smooth transfer of the business in a manner agreed upon by the owners in advance of the triggering event. This can minimize disruptions to customers or clients while the business is in the process of recovering.
3) The proceeds from the sale of a deceased owners interest can go toward certain estate settlement expenses (e.g., estate taxes and estate administration costs). In addition, part of the proceeds may be allocated to help pay the living expenses of the deceased owners family members. If the owner is disabled, the proceeds may be used to pay all of the familys living expenses.
4) The price established in the buy sell agreement may be used to provide a valuation for federal estate-tax purposes (but see your tax adviser for more details).