Can You Be Sued If You Break a Purchase Agreement?

The most direct answer to this question is that anyone can file a lawsuit against anybody at anytime if they feel they have a claim. Search engines are littered with sites dedicated to helping people across the country file suits in any district in the land. The issue to address is how to lessen the chances of a lawsuit and mitigate any damages should the suit occur.

What is a purchase agreement?

A purchase agreement is a legal contract to transfer real property from one party to another. The property can be any tangible item including a home, vehicle, business, acreage or equipment. The agreement always includes a detailed description of the property involved as well as the sale price and the timeframe to complete the transaction.

Early termination clause

Both parties enter into the agreement with the full intention of completing the transaction. That being said, unexpected or unusual circumstances can create issues which jeopardize the deal. It is vital that the contract contain an early termination clause which allows either party to break the agreement without penalty under certain conditions with an adequate written notice.

Contingency provision

In the event that the agreement cannot be terminated according to an early termination clause, a contingency provision allows the transaction to be broken for a specific amount of compensation. Usually in the case of a purchase agreement this would be the amount of the initial earnest fee.

Indemnity and hold harmless provision

Carefully read the indemnity and hold harmless provisions prior to signing any contract. These clauses are commonplace in business law and more often than not fully indemnify one party from all legal expenses. In the event that the plaintiff is indemnified, the defense would be fully responsible for all legal fees incurred by both sides should the plaintiff win the case.

Arbitration clause

The last major clause to include is an arbitration clause. This statement clearly dictates that both parties agree to settle a dispute out of court through a certified arbitrator. Arbitration costs less and is a much quicker process than a lawsuit that goes to trial.

References

• Home Purchase Agreement
• Sample Business Purchase Agreement