As Cyclone Alfred approaches the SE Qld / Northern NSW Coast it got me thinking of the cause and effect of damage from the cyclone, and how it could affect a property or business transaction.
I’m actually selling a business of March 17th and the contract of sale DOES NOT have a Natural Disaster provision.
A “Natural Disaster” includes, but is not limited to, any act of God, flood, fire, earthquake, cyclone, pandemic, or other catastrophic event beyond the control of either party that significantly affects the Business, its operations, or the ability to complete this transaction.
If a Natural Disaster occurs after the execution of this Agreement but before Completion (Settlement), and such disaster materially affects the Business’s operations or assets, the parties agree to negotiate in good faith to determine an appropriate course of action, which may include:
- Postponing the Completion Date for a reasonable period to allow the Business to recover;
- Adjusting the Purchase Price to reflect any losses incurred; or
- Proceeding with Completion as originally agreed, subject to any necessary adjustments.
If the Natural Disaster results in substantial damage to the Business or renders its operations unviable, either party may terminate the Agreement by providing written notice to the other party.
Insurance & Risk Allocation
- The Seller warrants that the Business maintains adequate insurance coverage for natural disasters, and such policies shall remain in effect until Completion.
- If an insured event occurs, any insurance proceeds received shall be used to restore the Business to its pre-disaster condition, or if agreed by both parties, the proceeds shall be transferred to the Buyer upon Completion.
Termination Rights
If the parties cannot reach an agreement within [X] days following a Natural Disaster, either party may terminate this Agreement without penalty. Any deposits paid shall be refunded to the Buyer, less reasonable costs incurred by the Seller in preparation for the sale.
Force Majeure
Nothing in this clause shall prevent either party from invoking force majeure provisions if applicable, subject to the laws governing this Agreement.
Sounds reasonably straight forward – but what if the contract of sale does NOT have a natural disaster provision ?
