Lockout Agreement in Contract

A lockout agreement in a contract is a provision that prevents a seller from negotiating with other potential buyers while the prospective buyer conducts due diligence and finalizes the terms of the agreement. This agreement is typically included in contracts for the purchase of property or businesses.

The purpose of a lockout agreement is to give the prospective buyer a period of exclusivity to complete their due diligence and finalize the terms of the agreement. This period can range from a few weeks to several months, depending on the complexity of the transaction.

During the lockout period, the seller is prohibited from soliciting or accepting any other offers from potential buyers. This gives the prospective buyer a sense of security and allows them to focus on completing their due diligence without the risk of losing the deal to another buyer.

In some cases, a lockout agreement may also include a break fee or penalty clause to compensate the prospective buyer in the event that the seller breaches the agreement and accepts another offer.

It is important to note that a lockout agreement is not a guarantee that the deal will be completed. Ultimately, the prospective buyer must be satisfied with their due diligence and the terms of the agreement before proceeding. However, a lockout agreement can provide a level of assurance and help to facilitate a smoother transaction.

In conclusion, a lockout agreement in a contract is a provision that prevents the seller from negotiating with other potential buyers while the prospective buyer conducts due diligence and finalizes the terms of the agreement. This agreement provides a period of exclusivity for the prospective buyer and can help to facilitate a smoother transaction.

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