Sale of Business: Comprehensive Analysis of Instructions and Contract

This assignment presents a detailed legal analysis of a business sale, beginning with client instructions and progressing through the drafting and review of a contract of sale. The scenario involves Charles John Dickenson selling 'Food Glorious Food' to Olivia Twiss, outlining the sale price, assets, deposit, settlement date, and other key terms. The analysis covers the vendor's legal obligations, including providing a vendor statement, addressing capital gains tax (CGT) and goods and services tax (GST) implications, and obtaining necessary consents for lease transfer. The assignment also examines special conditions such as rental reductions and weekly takings, as well as the transfer of a hire agreement for a neon sign. It highlights the importance of obtaining landlord and mortgagee consent, the requirements for a going concern exemption from GST, and the limitations of the legal retainer. The document includes the contract of sale and relevant attachments such as the duties form and email correspondence. Finally, the document includes a property sale scenario of 58 Melva Circuit, St Kilda, VIC 3182 involving the sale of a residential property. The file opening steps, title searches, and duties form details are provided for analysis.

Page 1
[INSERT Your LETTERHEAD]
Our ref: [Need to be filled by the student]
Charles John Dickenson
33 Glendene Avenue,
Kew, Vic 3101
Dear Mr Charles John Dickenson
Vendor: Charles John Dickenson
Purchaser: Olivia Twiss
Business: Food GloriousFood
Premises: 130 Denmark Street KEW, VIC 3101
Sale of Business
Thank you for asking us to act for you in relation to the above sale.
(Name of the Student) will be handling your matter. Please contact [him]/[her] directly if you have
any queries.
Your instructions
We refer to your meeting with our Supervising Partner on [date] and note your instructions as
follows:
Sale of Business
1. You are in the process of selling the above Business and have informally agreed with the
proposed Purchaser to the following terms for the sale:
Purchaser: Olivia Twiss] of 23 Liddiard Street, Hawthorn, 3122.
Business: Food GloriousFood
registration number 8998803
Premises: 130 Denmark Street KEW, VIC 3101
Sale Price: $100000 apportioned as $80,000.00 for Goodwill and
$20,000.00 for Assets.
All Assets of the Business are to pass on the Settlement
Date. We confirm you have provided us a list of the Assets
which we will include in the Contract of Sale.
Deposit: $10000being 10% of the Sale Price payable by the
Purchaser upon execution of the Contract of Sale.
Stock: Stock is included in the Sale Price.
Settlement Date: 22nd May, 2020 or earlier as agreed between the parties. You
will continue to trade the Business on the Settlement Date.

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Landlord: Nicholas Riviera, of Simpson Street
East Melbourne, 3002. The landlord’s lawyers are Dewey,
Cheatem and Howe, 1st Floor
Transfer of Lease: The Landlord has agreed to reduce the rent for the Premises
by $300 for a period of 3 months between 1 July 2020 and
30 September 2020.
Employees / Staff You current have 2 staff employed casually in the Business.
They are, Alan Lee, and Angela Lorne.
The Purchaser will not be employing the staff after the
Settlement Date and you will (if you have not already done
so) provide the staff with written notices terminating their
casual employment prior to the Settlement Date.
Restraint of Trade: You have agreed that, after completion the Settlement Date,
you will not be engaged in any business (whether directly or
indirectly) which will be similar to or in competition with the
Business.
The period of restraint is 2 years from the Settlement Date.
The restraint area is 5 kilometres in radius from the
Premises.
Assistance: You will provide the Purchaser (free of charge) with
assistance in the Business for a period of 3 days immediately
after the Settlement Date.
Such assistance entails allowing the Purchaser to observe the
way the Business is conducted by you and introducing the
Purchaser to the clients, customers and suppliers of the
Business.
Further, the Purchaser will be entitled to inspect the Business
and the Business Premises within 3 Business Days prior to
the Date for Settlement.
Weekly takings: The Sale is subject to the weekly takings of the Business for
the week of 11 May 2020 to 15 May 2020not being less than
$4,000.00.
If the Business does not achieve the takings level, then the
Purchaser will have the right to end the Contract of Sale.
If the Purchaser ends the Contract of Sale in this manner,
you must refund the deposit to the Purchaser without
deduction.
During the takings period you must give the Purchaser
access to the Business during normal trading hours, so that
she can obtain a working knowledge of the conduct of the
Business and check the takings.
Please telephone the writer by just after this date to instruct
whether the Business has achieved the minimum takings.

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Hire Agreement: The Business has a verbal hire agreement with Beta Neon
Pty Ltd (“Beta”) for a neon sign board.
Under that agreement, you pay $[amount] per quarter in
advance as invoiced by Beta.
There are no outstanding payments. Beta has indicated, in
writing, that it will transfer the hire agreement to the
Purchaser at settlement.
You have provided the Purchaser with a copy of the letter
from Beta.
2. Under the lease you must pay for building insurance. This amount will be adjustable at
settlement. You have provided us with a letter from National Capital Insurance Ltd which
indicates that that you have paid for the current period. We note your instructions you have
provided the purchaser with a copy of this letter.
3. You want us to prepare the Contract of Sale and attend to all necessary steps in the sale of
the Business.
We confirm that you have provided us with a copy of the lease agreement over the Premises
between you and the Landlord. We will assist you to transfer this lease into the Purchaser’s name as
part of the sale. The Purchaser is responsible for preparing the Transfer of Lease form, and we will
forward this document to you when we receive it and will advise you about it in more detail.
As the Premises is subject to a lease agreement and a mortgage agreement, the consent of both
the Landlord and their mortgagee is required. This requirement protects the Purchase’s interests, as
the Landlord or mortgagor would be entitled to deny the Purchaser access from the Premises if the
business was sold without their consent. It is the Vendor’s legal responsibility to obtain this consent.
We will assist you to obtain consent from the Landlord’s legal representatives.
We note in your instructions that the landlord has agreed to a rental reduction as outlined above. We
further note that you have provided a disclosure statement by the tenant regarding an assigned
lease as required by s 61(5) of the Retail Leases Act 2003 and that the statement has been signed
by the Landlord and the Purchaser.
Section 52 Vendor Statement
We confirm that you have provided us with a statement of a vendor of a small business, as required
under s 52 of the Estate Agents Act 1980 (Vic) and note that it has been signed by the Vendor and
the Purchaser.
It is important that you are aware of your legal obligations regarding this statement. The statement
must be provided to the Purchaser, and the Purchaser must acknowledge that they have received it,
before the Purchaser agrees to the sale. If the Vendor fails to provide a statement in the correct
form and containing all the required information, then the Purchaser is entitled to cancel the
contract. The Vendor would then be obligated to repay any money paid by the Purchaser regarding
the sale. The Vendor may also be guilty of an offence under the Act and liable to pay a penalty of up
to $1652.20.
We have reviewed the statement you provided, and we confirm that it is in the correct form and
contains all information required under the law. We note that the Purchaser has signed the
statement, acknowledging that she has received it.
Capital Gains Tax (“CGT”) and Goods and Services Tax (“GST”)
CGT

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The sale of a business may be considered a ‘disposal’ for CGT purposes and may give rise to
liability for CGT. There are exemptions to this that may apply depending on when the asset was
originally purchased, and whether any small business concessions are available.
We cannot provide you with advice about your obligations regarding CGT, and we recommend that
you make further inquiries with an accountant or tax specialist for further advice.
GST
The A New Tax System (Goods and Services Tax) Act 1999 (“The GST Act”) states that the sale of
a business may have implications on the vendor’s GST obligations. Under the Act, the vendor of a
business is making a ‘taxable supply’, which generally means that the sale attracts GST. However,
GST will not be imposed if the vendor is selling a business which is “a going concern”. There are five
requirements that the vendor would need to make out to obtain this exemption:
1. The sale must be for consideration, i.e. the business must be sold in exchange for money,
2. The purchaser must be registered for GST, or be required to be registered for GST,
3. The vendor and purchaser must agree in writing that the business is “a going concern”,
4. The vendor must supply all things to the purchaser that are necessary for the business to
continue to operate, and
5. The vendor must carry on the business until the settlement date.
According to your instructions, points 1, 2 and 4 are satisfied. General Condition 8.1 of the contract
or sale states that the Vendor and Purchaser agree that the Business is being sold as a going
concern, which will satisfy point 3. Therefore, as long as you continue to carry on the Business until
the settlement date of 22 May 2020, all requirements are apparently satisfied and the sale will be
exempt from GST.
It may be that the ATO does not consider the sale to be of a going concern, and charges you GST
on the sale. In this case, General Condition 8.3(b) requires that the Purchaser indemnify you for any
such GST that you are required to pay.
Further tax advice
We cannot provide comprehensive tax advice and so will not be providing further advice about the
tax implications of the sale. We recommend that you speak with your accountant for comprehensive
advice.
Further Steps
To protect the interests of the Purchaser, the consent of the landlord must be obtained before the
sale proceeds. Because the landlord is under a mortgage, the consent of the mortgagor is also
required. If either of these parties refuse consent, the Purchaser may be prohibited from using the
Premises and may be unable to operate the Business.
We will contact the law firm Dewey, Cheatem and Howe who act for the landlord Nicholas Riviera,
and request consent from the landlord and the mortgagor. We will advise you if we are unable to
obtain this consent.
Following this, the next step is for the parties to exchange contracts of sale. We have prepared a
contract which is enclosed for your review. Please read over the contract and confirm that it is
acceptable, particularly with regard to the following sections:
 The Operative Part
 Particulars of sale
 Special conditions 1 (Rental reduction condition) and 2 (Takings condition)
There is no need to return a signed copy of the contract at this time. We will send the contract to you
for signing after it has been signed by the Purchaser.

Page 5
Costs
Our fee for acting for you in this matter will be $2,500.00 plus disbursements, provided that the
matter proceeds in a straightforward manner. The fee has been calculated on a lump sum basis. We
do not expect disbursements to exceed $50.00.
We have enclosed a copy of the standard-form costs disclosure agreement, as well as a statement
outlining your rights regarding these costs.
Limitations of Retainer
Our services to you in this matter will be limited to advising on and executing the sale of business
and transfer of lease. We will therefore not be advising you on:
 Tax implications of the transfer (other than the CGT and GST advice provided in this letter)
 Employment matters
 Licensing requirements
Should you have any queries, please do not hesitate to contact Clare Manning.
Encl.
1. Costs disclosure statement
2. Statement of rights accompanying costs disclosure statement
3. Contract of sale
Should you have any queries, please do not hesitate to contact the writer.
Yours faithfully
[Name of the Student]
Attorney-at-Law
Attachment:

Page 6
Contract of
Sale of Business
[Ref: ]

Page 7
Contents
Operative Part______________________________________3
Signing Page_______________________________________4
Particulars of sale___________________________________5
Special conditions__________________________________8
General Conditions_________________________________9
MONEY__________________________________________9
1. Payments_____________________________________9
2. Settlement____________________________________9
3. Valuing stock________________________________10
4. Apportionment of outgoings and entitlements_____10
5. Vendor’s debts_______________________________11
6. Finance______________________________________11
7. Lease _______________________________________11
8. GST________________________________________12
TRANSACTIONAL_______________________________12
9. Running the business__________________________12
10. Inspection___________________________________12
11. Employees___________________________________12
12. Warranties___________________________________13
13. Restraint of trade_____________________________13
14. Confidential information_______________________14
BREACH OF CONTRACT________________________14
15. Default______________________________________14
LEGAL AND GENERAL__________________________15
16. Service of notices_____________________________15
17. Non merger__________________________________15
18. Severance____________________________________15
19. Guarantee, indemnity and promise_______________15
20. Interpretation_________________________________16
Schedule 1: Assets included in the price_______________17
Schedule 2: Equipment hire contracts_________________18
Schedule 3: Other material contracts__________________19
Schedule 4: Terms of current or new lease_____________20
Schedule 5: Permitted encumbrances__________________22
Schedule 6: Warranties_____________________________23
Warning and Disclaimer
This document is prepared from a precedent intended solely for use by legal practitioners. The parts of the document prepared by the Law
Institute of Victoria are intended for use only by legal practitioners with the knowledge, skill and qualifications required to use the precedent
to create a document suitable for the transaction. This precedent is not a guide and it does not attempt to include all relevant issues or include
all aspects of law or changes to the law.
Legal practitioners using this document should check for any change in the law and ensure that the facts and circumstances for its intended
use are appropriately included.
The Law Institute of Victoria, its contractors and agents are not liable in any way, including, without limitation, negligence, for the use to
which the document may be put, for any errors or omissions in the precedent document, or any other changes or understanding of the law
arising from any legislative instruments or the decision of any court or tribunal, whether before or after this precedent was prepared, first
published, sold or used.
Copyright
The document is copyright. The document may only be reproduced in accordance with an agreement with the Law Institute of Victoria Limited
(ABN 32 075 475 731) for each specific transaction that is authorised. Any person who has purchased a physical copy of this precedent
document may only copy it for the purpose of providing legal services for the specific transaction or documenting the specific transaction.
“Specific transaction” means common parties entering into a legal relationship for the sale and purchase of the same subject matter.
Operative part
The vendor agrees to sell and the purchaser agrees to buy:
1. The Business for the price; and

Page 8
2. The Stock of the Business for the value of the Stock calculated under this contract;
as a going concern on the terms set out in this contract.
Each party agrees to promptly perform that party’s obligations contained in this contract.
The guarantor guarantees, indemnifies and promises as described in general condition 19.
All the terms of the sale and purchase are contained in this contract. This contract includes:
 the particulars of sale;
 any special conditions;
 the general conditions; and
 the schedules attached to this contract.
The particulars of sale, any special conditions and the general conditions are to be interpreted in that order of priority in the absence of
any provision to the contrary.
Each party represents and warrants to the other parties and the guarantors that the party has not altered the general conditions in this
contract from the form published by the Law Institute of Victoria dated May 2014, except to the extent that they are amended expressly
by a special condition (if any).
The authority of a person signing:
 under a power of attorney;
 as director of a corporation; or
 as agent authorised in writing by one or more of the parties;
must be noted beneath their signature. That person represents and warrants to the other parties that the person has the power and
authority of that party to enter that party into this contract.
The vendor must provide a statement in writing to the purchaser in the prescribed form containing the prescribed particulars under
section 52 of the Estate Agents Act 1980 (Vic) if the Business is a “small business” as defined in that legislation.

Page 9
Signing Page
WARNING
THIS IS A BINDING CONTRACT. YOU SHOULD OBTAIN ADVICE FROM A LEGAL PRACTITIONER BEFORE
YOU SIGN.
Day of sale: / / being the date by which both parties have signed the contract.
VENDOR:
*(A party that is an Individual)
SIGNED SEALED AND DELIVERED in the presence of:
............................................................................................................
WITNESS:
Signature:...........................................................................................
(to be filled by student)
Name:.................................................................................................
(PLEASE PRINT)
Signature:...........................................................................................
(to be filled by student)
Name:.................................................................................................
(PLEASE PRINT)
*(A party that is a Corporation)
EXECUTED by [insert name of corporation and ABN/ACN]
............................................................................................................
in accordance with section 127 of the Corporations Act 2001:
DIRECTOR:
Signature:...........................................................................................
Name: (to be filled by student)........................................................
(PLEASE PRINT)
DIRECTOR/SECRETARY*:
Signature:...........................................................................................
Name: (to be filled by student)........................................................
(PLEASE PRINT)
*Delete as appropriate
PURCHASER:
*(A party that is an Individual)
SIGNED SEALED AND DELIVERED in the presence of:
............................................................................................................
WITNESS:
Signature:...........................................................................................
Name: (to be filled by student)........................................................
(PLEASE PRINT)
Signature:...........................................................................................
Name: (to be filled by student)........................................................
(PLEASE PRINT)
*(A party that is a Corporation)
EXECUTED by [insert name of corporation and ABN/ACN]
............................................................................................................
in accordance with section 127 of the Corporations Act 2001:
DIRECTOR:
Signature:...........................................................................................
(to be filled by student)
Name:.................................................................................................
(PLEASE PRINT)
DIRECTOR/SECRETARY*:
Signature:...........................................................................................
Name: (to be filled by student)........................................................
(PLEASE PRINT)
*Delete as appropriate
[*See Explanatory Memorandum for forms of signing clauses]

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Particulars of sale
Vendor:
Charles John Dickenson
Email: Fax:
ABN: ABN 23 103 563 205
Address:
33 Glendene Avenue, Kew, 3101
Vendor guarantor:
Address:
Email:
Vendor’s estate agent:
Telephone: DX: Ref:
Email: Fax:
Address:
Vendor’s legal practitioner: (Name of the Student)
Telephone: DX: Ref:
Email: Fax:
Address:
Purchaser:
Olivia Twiss
Email: Fax:
ABN: ABN 23 125 325 205
Address:
23 Liddiard Street, HAWTHORN VIC 3122.
Purchaser guarantor:
Address:
Email:
Purchaser’s legal practitioner: (Need to be filled by the student)
Telephone: DX: Ref:
Email: Fax:
Address:

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Business
(General condition 20.1(b))
Name: Food GloriousFood
Registered no: 0850922M
General description:
Take-away food
Business Premises
(General condition 7 and schedule 4)
Address:
130 Denmark Street, Kew 3101
The Business premises are occupied or used by the vendor as:
owner
tenant named in lease (refer to in schedule 4)
licensee named in license (refer to in schedule 4)
other (please specify)_______________________________________________________________________________
Price for Business: $100,000.00 exclusive of GST
Deposit: $10,000.00 on / / or the date the purchaser signs this contract if
none stated.
Balance: $90,000.00 payable at settlement
PLUS the value of the Stock up to the maximum stock value of:
$2550 exclusive of GST is also payable at settlement. (General conditions 3 and 20.1(h))
Valuer
(General condition 3.1)
The parties must value the Stock and each item of Stock up to the maximum stock value unless they decide to engage an independent
valuer by marking the box “valuer”.
Due date for settlement: / / or such other date agreed in writing.
Means of Payment of:
(General conditions 1.3 – 1.6)
The balance of the price by Bank cheque unless the box is marked “EFT”
The value of Stock by personal cheque unless the box is marked “EFT” or “Bank cheque”
Assistance period
(General condition 9)
days before the due date for settlement

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*and days after settlement
*Delete or complete as appropriate wherever asterisk (*) appears.
Restraint of trade
(General condition 13)
Time from date of settlement Distance from business premises
2 Years Restraint of trade 2 years 5 KM
Finance
(General condition 6)
Lender
Loan not less than $
Approval date