The Components & Clauses in a Website Purchase Agreement

So, you’re looking to sell your website, the buyer has performed all necessary due diligence, you have finalized all negotiations, and now both parties are ready to sign a formal binding website purchase agreement.

Congratulations are in order as you are almost at the finish line. Once the website purchase agreement is signed and delivered, the website assets and cash are transferred via escrow. Then, the deal is closed.

A website purchase agreement is a very important document in a website sale transaction. It outlines and formalizes the website sale process. A lot of work goes into getting to this point in a sale process. In this article, we will cover some of the important details to include in the agreement. Of course, the complexity of the agreement depends on the size of the website sale transaction. Lower dollar transactions tend to have shorter and simpler agreements while larger dollar transactions call for more complex agreements.

1. Who is the buyer and who is the seller?

Most sale contracts open up by defining the buyer and seller who could be individuals or businesses. It will normally also include the effective date that the agreement was entered into.

2. What is the consideration?

This section will outline the purchase price of the website and how this purchase price will be paid by the buyer to the seller.

If the website transaction involves seller financing, this section will detail the amount of the down-payment and when it must be paid. And it will also state how the balance of the purchase price will be paid to the seller. These could be fixed monthly debt payments over a specified period of time.

In many cases, a detailed payment schedule may be included as an exhibit in the purchase agreement.

3. What assets are included in the sale?

The section will outline in detail all the assets that the buyer is acquiring from the seller. This eliminates any misunderstandings between both parties.

A website seller can only sell assets that he owns free-and-clear to the buyer. By listing out the assets in this section, the seller is representing that he owns these assets and is legally permitted to sell them to the buyer.

4. What assets are excluded in the sale?

In transactions that are more complex, some buyers or sellers insist on stating specifically which assets are not included in the sale. This eliminates any misunderstandings between both parties. In this way, no assets are transferred from the seller to the buyer that are not explicitly agreed to.

5. How will the assets be transferred?

In complex transactions, where there are a lot of assets that need to be transferred from the seller to the buyer, it may be necessary to clearly outline how these assets will be transferred.

Most asset transfers involve an escrow process. But some transfers also involve a detailed legal process that must be followed carefully in order to transfer title and ownership from one party to the next.

6. Are any liabilities being assumed by the buyer?

Because most website owners own multiple websites in their portfolio, generally, most website sales are asset sales. They do not involve the purchase of stock in the seller’s business. As such, it is very rare in website sale transactions under $5 million for a buyer to purchase shares in a seller’s website business. Therefore, buyers never assume the liabilities of a seller’s company.

In the very rare instances where buyers do assume the liabilities of the seller, these liabilities need to be outlined in the agreement.

7. Representations and Warranties

In this section, the seller states explicitly that he owns the assets he is selling and therefore has the legal right to sell them to the buyer. This is also where he may state other facts such as that there are no liens or legal claims against the assets he is selling.

The buyer also states explicitly that he has performed all necessary due diligence, he understands the current state of the business and based on this understanding, he is able and willing to acquire these assets.

The representations and warranties section can include additional representations by both parties but these are the common representations.

8. What is the closing date?

Some transactions are complex and a specific closing date must be included in the agreement that all parties agree to abide to.

9. Survival of Undertakings

This section simply states for how long the clauses in the agreement will survive. This can often be about 2 years or more.

10. Pre-closing Acknowledgements

In this section, both the buyer and seller simply acknowledge and detail all the activities that have occurred prior to this website purchase agreement. This includes due diligence.

Note that this section is not necessary in very simple website sale transactions.

11. Post-closing Acknowledgements

This section outlines all the post-closing terms agreed to by both parties. This could include elements such as a non-compete clause and the agreed-upon training and support provided by the seller to the buyer.

It will normally also include any indemnification clauses. That is, how the buyer or seller or any other parties will be indemnified or compensated if something goes wrong.

This section could also include the terms of any fees owed to brokers or third parties who were part of the transaction.

12. Waivers, Expenses, and Notices

This section will simply indicate if there are any waivers, how the parties will pay for any expenses incurred to execute this agreement, and to whom any specific notices should be addressed.

13. Governing Law

The final section will lay out which legal jurisdiction the agreement shall be governed by. If the buyer and seller live in different jurisdictions, they will have to negotiate and agree to a jurisdiction.

In order to make things simple, some buyers and sellers often agree to an arbitration process that may be included in the agreement. In this way, if there is any disagreement, an independent arbitrator agreed to by both parties will step in to resolve the dispute and impose a binding resolution.

14. Signatures

Both the buyer and seller or their representatives sign the agreement and the deal is closed.

15. Exhibits

In complex website sale transactions, there are often additional exhibits that need to be included. These exhibits could detail inventory, domain names, domain name assignment agreement, debt payment schedule, tangible assets, intangible assets such as customer databases or website content, vendor or supplier contracts, and even the purchase price allocation.

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