Buy and Sell Agreement is established when people with interest in a business agrees to buy the others share on time of death or disability.
It is common practice for persons with a common business interest to agree to purchase each other's interest in the event of the death of either one of them.

An agreement of this nature will ensure that the surviving party or parties will retain control of the business and allow the business to continue functioning smoothly. The deceased's dependants are assured of releasing a cash sum for his interest in the business and are spared the frustrations and negotiations that often accompany the sale of a business interest after the death of the principal.

The finances required to fund the purchase is, in most cases,provided by the proceeds of a life assurance policy, hence the term "buy-and-sell" assurance. The three types of business enterprise where agreements of this nature are common are.

Partnerships,
Companies,
Close corporations.

Whilst the consequences of the death of a partner, shareholder of a company,or a member of a close corporation differ, the general principles of the agreements, to buy and sell in the event of the death of one of the parties, remain the same. For the sake of simplicity, the term "partner" and "partnership" will be used, but it should be remembered that the discussion will apply equally to shareholders in a company and members of a close corporation