Business buyers need to make sure that they protect themselves in sale and purchase agreements (SPA) while not making clauses so draconian they are unenforceable.
There are plenty of risks that buyers of businesses take on when they complete a sale and purchase agreement but many can be mitigated to some extent with contractual provisions such as warranties, restrictive covenants and liquidated damages clauses.
In protecting themselves, buyers need to be aware of a fundamental principle of contract law; that contractual damages seek to put the injured party in a position they would have been in if the contract was properly performed. The emphasis is on compensation not punishment.
Contractual provisions should not seek to be disproportionate or punitive for the seller or they will not be enforceable.