A purchase and sale agreement is the definitive legal contract that governs a business transaction, setting out every binding term, condition, representation, and obligation that the letter of intent summarized in principle.

The PSA is the transaction. Every commercial term agreed in the LOI, price, structure, adjustments, and conditions, is given legal force in the PSA. Every representation the seller makes about the business is recorded here, along with the survival period and indemnification consequences if those representations turn out to be inaccurate. Conditions to closing, closing deliverables, earnout mechanics, non-compete provisions, and post-closing obligations all live in the PSA.

The PSA is typically a lengthy, heavily negotiated document produced by legal counsel on both sides. Business owners who rely entirely on their lawyers to manage the PSA negotiation without understanding the commercial implications of specific provisions frequently agree to terms they later regret, indemnity caps that are too high, earnout metrics that are too easily manipulated, or non-compete restrictions that are broader than expected. The PSA is a legal document with significant commercial consequences.

The PSA translates the deal agreed to in principle into the deal that is legally binding. The distance between those two is worth understanding before signing. See how Wefinx approaches exit planning.

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