Certain transactions: Overview, definition, and example
What are certain transactions?
Certain transactions refer to specific types of business activities or contractual arrangements that are highlighted or treated in a distinct manner under the terms of an agreement. These transactions are often identified as being particularly important or needing special conditions or provisions due to their nature. For example, they might include large financial transactions, mergers, acquisitions, or the transfer of ownership in a business. In contracts, these transactions might be subject to additional clauses to ensure they are handled properly, and the parties involved are protected.
Why are certain transactions important?
Certain transactions are important because they typically involve significant financial commitments, legal considerations, or business implications. By identifying these transactions in a contract, businesses can ensure that there are clear terms and protections in place for handling them. This reduces the risk of disputes and helps manage the complexity of these significant events. These transactions may also trigger specific regulatory or compliance requirements that need to be addressed to avoid legal issues.
Understanding certain transactions through an example
Imagine a company is entering into a contract with a supplier, but the contract includes a clause specifying that any transaction involving the sale or transfer of more than $1 million worth of goods requires additional approval from both parties. This ensures that the parties recognize the importance of such a large transaction and that both sides are on the same page about the terms, risks, and obligations involved.
In another example, a business acquisition might be a "certain transaction" in a contract that requires the buyer to notify the seller before making any changes to the business's structure or operations. This gives both parties the opportunity to review and approve any significant decisions to prevent disputes.
An example of a certain transaction clause
Here’s how a certain transaction clause might look in a contract:
“Any transaction involving the sale, transfer, or assignment of assets exceeding $500,000 must receive written consent from both parties before proceeding.”
Conclusion
Certain transactions are critical activities that require special attention in contracts due to their complexity or importance. By explicitly identifying these transactions and outlining the conditions under which they are handled, businesses can prevent misunderstandings and ensure that both parties are protected during significant events. These clauses provide clarity and help manage the risks associated with key business activities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.