Designated purchaser: Overview, definition and example
What is a designated purchaser?
A designated purchaser refers to a person or entity specifically chosen to buy goods, services, or assets under a contract or agreement. This person or entity has been identified by the parties involved to complete the transaction.
For example, in a business sale agreement, the buyer may designate a specific entity or individual to complete the purchase of the company's assets.
Why is a designated purchaser important?
A designated purchaser is important because it helps clarify who is responsible for completing a transaction. This ensures that all parties know who is legally authorized to make the purchase, which helps prevent misunderstandings or disputes during the process.
Having a designated purchaser also provides clarity on who will assume the rights and obligations tied to the purchase, making the transaction smoother and more straightforward.
Understanding designated purchaser through an example
Imagine a company selling its assets, including equipment and inventory, to another company. The seller and buyer agree that a subsidiary of the buyer will be the designated purchaser. The subsidiary will handle the actual purchase, taking responsibility for the transaction, even though the parent company is the one making the initial offer.
This designation ensures that the seller knows exactly which party is authorized to complete the deal and handle all associated responsibilities.
An example of a designated purchaser clause
Here’s how a designated purchaser clause might look in a contract:
"The Purchaser designates XYZ Corporation as the designated purchaser for the acquisition of the assets described in Schedule A. XYZ Corporation shall be responsible for all aspects of the purchase, including payment and transfer of ownership."
Conclusion
A designated purchaser is an individual or entity specifically chosen to complete a transaction. Identifying this party in a contract ensures that the purchase process is clear and efficient, minimizing confusion and ensuring that the right party is responsible for the transaction.
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.