Purchase Agreement — Plain-English Summary
Purchase agreements cover what's being bought, the representations made about it, and what happens if those representations turn out to be wrong. Paste a purchase agreement below and get a plain-English summary of the five most common red flags, the clauses typically expected on a standard version, and notes on where state law often changes the picture — in about 30 seconds. Informational only — for anything binding, consult a licensed attorney in your state.
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Five red flags we see most often in a purchase agreement
None of these are automatically deal-breakers — context and negotiating leverage matter. But if you see one on a draft, it's worth pushing back or escalating to counsel.
- 1'As-is' language that tries to extinguish all representations — often coupled with a broad release.
- 2Indemnification baskets and caps that make it economically impractical to recover for small breaches.
- 3Earnouts and holdbacks with client-controlled triggers.
- 4Non-compete covenants on sellers that extend beyond the reasonable protection of goodwill.
- 5Disclosure-schedule mechanics that shift the burden to the buyer to find defects.
Three clauses you should expect on a fair purchase agreement
If any of these are missing or written vaguely, that alone is worth asking about.
- 1Description of the asset being sold and the purchase price.
- 2Representations and warranties from both sides.
- 3Closing conditions and remedies for breach.
State-specific variation on a purchase agreement
Real-estate purchase agreements, UCC sales, and M&A purchase agreements are each governed by different statutes — and some provisions (disclosure obligations, bulk-sales rules) are state-specific.
BeforeSigning is not legal advice and does not create an attorney-client relationship. For anything binding, consult a licensed attorney in your state.
Terms to know before you read a purchase agreement
Three terms that come up repeatedly in purchase agreement drafts. Knowing these is the difference between skimming past a real issue and catching it.
- Indemnification →
An indemnification clause shifts liability — one party agrees to cover losses, damages, or legal fees the other party incurs from specified events.
- Liquidated Damages →
Liquidated damages are a pre-agreed dollar amount payable if a party breaches — commonly used when actual damages would be hard to calculate.
- Merger Clause →
A merger clause (or integration clause) states that the written contract is the complete and final agreement, overriding any prior discussions or side promises.