Without a doubt, many of you have come across options to purchase in contracts.  What you may not know about them however, is courts may not always enforce them.  So what do courts examine in determining whether to validate an option to purchase?  The recent North Carolina Business Court case, NRC Golf Course, LLC v. JMR Golf, LLC, offers tremendous insight on this issue.

According to the parties’ contract, plaintiff had the option to purchase a golf course for the “fair market value at exercise date validated by an independent third-party appraisal.”  Plaintiff later offered $750,000—the value of the golf course according to an appraiser—which was refused by defendant who argued the option was invalid.

While North Carolina courts in the past have validated options that leave the purchase price to be determined by an appraisal, the Business Court found that in this instance, the option was not enforceable.  According to the Court, the option “not only lack[ed] a sufficiently definite price term, but also lack[ed] a sufficient method by which to determine the price term.”  Thus, the parties’ method for determining purchase price should have been more clearly stated.

The Court found an additional flaw in that the parties did not draft any terms concerning how to select an appraiser or how to resolve discrepancies between different appraisals.  To deal with the latter situation, the Court suggested having the appraisers pick a third appraiser and having the purchase price be the average of the two closest appraisals.

If you have questions or would like more information please feel free to contact us.

Whenever a new year rolls around, you often hear people making resolutions for themselves.  But wouldn’t it be great if we could improve both ourselves AND our businesses this year?  Such a goal can easily be achieved by formulating a business plan specific to your company.

But what is a “business plan”?  Generally, it is a plan that lays out how to run your business on an annual basis.  However, a comprehensive and effectively designed business plan can accomplish all this and more.  Here are some of the positives that come with drafting a comprehensive business plan:

• A Sense of Direction: An effective business plan will illustrate: (1) the current state of your company; (2) your future hopes for your company; and (3) the means you aim to use to get there.
• Management on The Offense Instead of Defense: A well-constructed business plan allows management to spot potential problem areas in advance while they are still on paper instead of having to clean them up after they come to fruition in real life.
• Better Communication: A comprehensive business plan allows the drafter to truly come to grips with his/her vision for the company.  Such clarity enables others to provide more effective input regarding company matters.
• You AND Others Will Take the Company Seriously: Detailed business plans impress creditors and lending officers.  What’s more, they satisfy you psychologically since others are taking you and your business seriously.
• More Capital:  Business plans often help you raise additional capital for your company.  The reason for this stems from the fact that since business plans force you to focus on accounts receivable, sometimes you free up additional funds.

So how do you construct a business plan?  What should you include?  Business plans generally consist of the following:

1. A Statement of Your Company’s Objectives
2. Your Company’s Strengths & Weaknesses
3. Your Company’s Position in the Marketplace
4. The Future Direction of Your Company
5. Other Critical Issues Worth Considering

Before formulating your business plan, it is always helpful to consult other professionals such as your CPA and/or Attorney.  However, there is no magic formula, and your business plan should reflect your company’s needs and be specific to your line of work.