What is meant by onerous terms or provisions?
An onerous contract is one in which the costs to fulfil the terms of the contract exceed the benefit that can be gained from the contract. An example would be a contract to lease a piece of machinery, which obliged the lessee to continue making lease payments even if the machinery was no longer in use by the lessee.
Why is it important to understand if your contracts contain onerous terms or provisions for the purposes of a transaction?
A prospective buyer will want to understand the terms of the contractual obligations they would be taking on were they to purchase your company. This will include understanding any onerous terms, as such terms would lead to a net cash outflow.