Ensure the transaction is beneficial to both the buyer and seller before you continue. The contract is the actual written agreement between you and the seller. This is going to be the legal and binding part of purchasing a website that needs to be accurate. The purpose of a contract is not to give anyone distinct power over another. Rather, it should provide equal protection for everyone involved with the sale. The following checklist contains aspects of the contract you should not overlook.
The Agreement Itself
Some website sellers prefer to use an escrow service to ensure payment before they turn the website over to the buyer. This service takes the payment and notifies the seller when the funds have cleared. If the deal goes sideways, then the escrow service will keep the money until the site returns to the seller. If either party prefers to use an escrow service, the contract should reflect this. When it comes down to the contract used, you and the seller should both agree on it.
What Type of Contract Will You Use?
Usually, the seller chooses the contract. The seller has an infinite number of choices when choosing a contract. They can contact a lawyer and have an original one drawn up, or they may already have a previous contract from another website they sold. Quite a few online documents are also available to purchase for a nominal fee. However, if you go with a purchased contract, be sure to find out if it is actually a legal document. Signing a contract that isn’t legally binding can cause you to lose any money you hand over with no recourse.
What Does the Contract Include?
Contracts usually comprise more than a single page. There is a lot of legal jargon in most business agreements, especially when it entails the exchange of property. When you purchase a website, it’s like investing in physical real estate: so many of the inclusions on the contracts for either of these transactions are interchangeable. You will find some of the following sections on many, but not all, contracts:
- Description of Parties
- Description of Business
- Description of Sale
- Transfer of Property
- Purchase Price
- Assumption of Risk and Liabilities
- Covenants
- Transition
- Participation or Absence of Brokers
- Conditions
- Closing
- Miscellaneous
- Signatures
- Exhibits/Appendices
Is the Document Beneficial to Both the Buyer and Seller?
The contract should provide benefits for you and the seller alike. Having a one-way document only creates distrust between the buyer and the seller. The contract should protect the transfer of cash between you and the seller, and the ongoing commercial operations. The contract should document the method for transferring ownership of the site, so both parties understand how it will take place. This contract should also protect any future and current copyrights. An additional benefit, the contract should outline any terms of competition. Having a non-compete clause will save you both from future headache.
Who Does the Contract Protect?
Since a contract is an agreement, shouldn’t it protect all parties involved? No one wants to go into something that might turn into a huge personal loss. The idea behind buying and selling websites is usually to benefit both parties, so the contract should protect everyone involved in this transaction. Be sure to read over the entire contract, no matter how long it is, and check the fine print. It’s easy to miss something the first time around, so double check each section. Sellers are often only out to make money during the sale of their website and want the contract to be clear and correct. However, there are a few who devise contracts that only protect themselves and not the buyer, so be careful.
Remember, you make the real, long-term, money at the time of purchase and not while selling something. The seller may draw up the contract used for a website purchase, but both parties need to agree upon it. It doesn’t hurt to ask questions about the contract. Asking questions shows the seller you know what you are getting into and you know what website purchases involve. Be sure to go over this checklist and add a few things of your own as you think of them. Then, if you still are not sure you have completely minimized your risk, take Henry Ford’s advice and hire an expert of your own–a little investment now can save you many times over in the long term.
*Originally published on WorldStart July 06, 2010
