Should I fix messy contracts before thinking about selling?

Contracts are where a sale meets reality. A buyer is acquiring the relationships and commitments the business already has, so agreements that are missing, expired or unclear can become questions at the table. BDC’s guide to selling includes a plain instruction: review contracts, leases and business agreements, and update them if needed. Doing this early gives you time to repair what you find.

Know what you have

Gather every agreement in one place: customer contracts, supplier terms, the lease, equipment financing, licences and employment agreements. Then note which are written, which are expired and which exist only as a handshake. BDC’s due diligence guidance tells buyers to ask whether any customers make up a large portion of sales, and to make sure key contracts, such as leases and customer contracts, can be assigned to them if necessary.

Look for clauses that restrict a sale

If a buyer is to take over an agreement, check whether the other party must consent. Read each one for assignment, consent and change-of-control wording, because a clause that restricts transfer can give the other side a say in whether the relationship continues after a sale. If consent is needed, ask your lawyer when to request it, since asking too early can disclose your plans. BDC’s purchase agreement guidance shows where the vendor discloses known issues, so this list will be needed anyway.

Decide what to repair first

• Put key customer and supplier terms in writing if they are not.
• Renew agreements that are close to expiry, with your lawyer’s advice.
• Clean up the lease, which a buyer may need to take over.
• Note any agreement a buyer would need consent to assume.

Keep the paper trail

Whatever you change, keep dated copies and a short index. BDC says the purchase agreement is where the vendor describes the condition of the business and discloses known issues, so a tidy index makes that exercise faster and more accurate. For one specific gap, see what to do if there is no written contract with key customers.