What Is A Due Diligence Agreement

An experienced business client once pointed out to the author that he could always determine whether it was worth considering doing business with a potential joint venture by seeing what they required in terms of due diligence. « If they don`t ask for much more than I want to give, if they don`t make me angry by insisting on access to everything, including my grandmother`s 1890 tax returns, then they`re not good enough to do business with me. because I certainly want to know everything about them. « It is therefore important that the parties record in writing what has been verified when, by whom, and that the seller can prove exactly what was contained in the delivered package. Before a buyer exercises due diligence, the seller should receive in writing from the buyer that the buyer had reasonable access to all requested documents. and does not require more. If, for any reason, a buyer does not wish to exercise due diligence, a wise seller will confirm that buyer`s decision in writing and indicate that buyer therefore assumes the entire risk of non-compliance with due diligence. In 1984, the Arizona Court of Appeals ruled in a similar case in Horizon Corp. v.

Westcor, Inc., 142 Ariz. 129, 688 P.2d 1021 (App. 1984). Westcor had entered into a purchase agreement with Horizon that was subject to a number of conditions, including site plan approval, zoning and financing. The Trial Court concluded that the contract was illusory for lack of consideration, since Westcor found a margin of appreciation in compliance with the conditions, compliance with which was at Westcors` sole and absolute discretion. However, the Court of Appeal reversed the trial court`s judgment, finding that Westcor was implicitly required to seek to comply with the Terms in good faith and that Westcor was required to exercise its consent or rejection of the Terms in good faith. See also A.R. Mack v. Coker, 523 p.2d 1342 (Ariz. App. 1974) (concluded that the buyers` efforts to obtain financing provided sufficient consideration for the performance of an option contract); see Steiner v.

Thexton, 2010 WL 960418, *3 (The implicit commitment [of good faith and fair trade] does not override any explicit wording of the agreements.). It should be noted that due diligence is a really important effort and the average transaction, even if it involves relatively small companies, requires hundreds of hours of due diligence with the help of appropriate accountants and legal experts. A venture capitalist, represented by the author, estimated that average due diligence costs between fifty thousand and one hundred thousand dollars. but it was in the exhilarating days of Silicon Valley. Depending on the size of the company or business acquired, and depending on the staff selected to perform the task, the cost can be kept out of their pocket at five or ten thousand dollars, but the hours to invest are still substantial. So, what is a due diligence contract or the due diligence process? Nevertheless, some basic forms and approaches can be adopted, although the particular circumstances of a transaction may require more or less. .