Buy And Sell Agreement

What does Buy And Sell Agreement mean in American Law?

The definition of Buy And Sell Agreement in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

An agreement between or among the owners of a business, which may be organized as a partnership or corporation, addressing what is to happen to the interest of one of them who dies or otherwise leaves active involvement in the enterprise. The agreements admit of many variations, though most commonly the core provisions require the remaining owners (or the company-in which case the contract is sometimes called an “entity buy and sell agreement”) to acquire the interest of the exiting party, on specified terms, he being also obliged to offer it to them.

Such agreements are important for tax purposes, but they are also important to provide a mechanism whereby co-owners of a business who fall out can disentangle from each other without destroying the business or each other.