VIC How Does Business Impact the Contract of Sale?

[Mr Wendel]

I am in the process of selling a business I have created but am yet to begin operation, which I have been forced to no longer pursue due to a change in circumstances.

I have everything in place for the business to begin operation, hence it is in a position to sell and be taken on by a seller for immediate launch.

Given the business is being sold prior to the operation, the financial information is based on the investment made to date, projections, and quotes from suppliers, rather than operating financial information.

I have represented the investment to date, the required costs to begin operation, plus financial projections for year one of operation as accurately as they are known to me, and provided the qualifications that once operation starts some costs may vary.

If they do in fact change once the business is operational, how does this impact me under the warranties of the contract of sale? I.e. If costs and financial outcomes encountered vary from those I have projected, does this constitute a misrepresentation?

As background, the sale of the business is for a fee of <$5000.

 

[Rod]

It is unlikely to be a misrepresentation as long as it is clear what figures are projections and includes the basis on how you arrived at the projections. The figures must be realistic for a $0 revenue business.

However if you have warranties in the contract you need to see if a warranty provision may be enacted if projections are not met.

 

[Al_M]

You need to make it clear in the contract that your projections are just that. Like any business, projections can only be realised if a whole lot of factors are achieved in the business.