For example, a contract may exist between a business and a supplier that restricts the transfer of any rights or duties regarding the sale of products without the supplier's approval. For example, there may be a significant purchase discount offered to the current owner of the business that the supplier may not want to extend to a different owner. This purchase discount may be what keeps the business at an advantage with its industry competitors. In short, a buyer should check any existing contracts for transferability clauses and the conditions they impose. State laws play a big part in this area.
Many states have laws governing legal relationships between distributors and their suppliers.
It is imperative that anyone considering selling their business or acquiring another company be aware of the applicable state laws. This concern is in addition to reviewing existing legal agreements between the seller and their suppliers. This sort of agreement is very important to the negotiations between the buyer and seller of a business. A confidentiality agreement should be executed at the outset of any negotiations. The agreement should clearly define what is to be kept confidential between the negotiating parties as well as who is not to be contacted during the negotiations.