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The Commercial Offer form, A review PDF Print E-mail



By Jayson Schwarz


The Offer is the blueprint that sets out everything that will happen in the process. It says what you are paying and what you will pay for and truly what you are getting. It is the MOST important document in the process. So make sure you understand exactly what is going on. The offer we will discuss is the OREA (Ontario Real Estate Association) form of an Agreement of Purchase and Sale for the purchase of a Business in Leased Premises under the Bulk Sales Act of Ontario as most deals follow this fashion. If you wish to have the different kinds of offers explained see other articles dealing with this on www.schwarzlaw.ca.

After the names of the buyer and the seller the Offer provides for the name of the business and indicates the purchase includes the chattels, fixtures and inventory of the business, confirms they are located on the premises of the business and that you the buyer have inspected and approved same (make sure you have).  The Offer then lists the address and goes on to indicate you are also buying the lease to the premises the trade-name and goodwill of the business. Next are a number of housekeeping matters such as the irrevocable date, deposit structure, closing date and notices. This is followed by the GST clause. Be sure to ensure you are registered with GST before making the offer to avoid last minute scrambles.

The non competition clause must be reviewed and amended as necessary by your solicitor to ensure it adequately protects you. In Ontario it is extremely difficult to enforce these clauses and therefore in order to achieve the protection you require, get the help of a lawyer.  Similar to this are the representation and warranty clauses. These are the promises that you rely on and may have to enforce later, to ensure that you are getting what you will be paying for. You need to be aware of the clause dealing with the treatment of employees and how it will affect your business. Thereafter are the seller’s promises to comply with the Retail Sales Act, the Bulk Sales Act, delivering a valid assignment of lease and indemnification of the buyer. The balance of the offer contains standard OREA clauses that are in every offer of this type, your lawyer should explain them, but they are not enough.

In addition to the offer you need a carefully drafted Schedule “A” which forms an integral part of the offer and needs to include everything necessary: things like conditions on financing, environmental issues, liquor licence transfer, etc. A word of advice; in order to truly provide you with the best possible offer, ensure you understand what you need and then explain it to your representative: explain the business, the business plan, your financing requirements and availability, your corporate structure and anything else that can help your representative give you the best offer you need.

Drafting the offer can be a daunting experience but remember this is not something you do and then find a lawyer to fix it later. Whatever you put in the offer will form the template of your deal; it will save you if drafted properly or handcuff or cost you dearly if drafted improperly. See a lawyer up front, spend the money; it will be the cheapest investment you ever made.

It should be noted that this article only touches on but a few of the issues surrounding the offer to purchase a business.  For a thorough understanding of the intricacies of this form of transaction we recommend you seek professional advice, to ensure that your contemplated transaction is structured to maximize and protect your interests.