Seller warranties and limitations on liability: commonly negotiated issues: share purchases

by Practical Law Corporate

A checklist that highlights common areas of negotiation concerning the seller's warranties and limitations on liability in a share purchase agreement (SPA). The checklist outlines buyer-friendly, seller-friendly and potential compromise positions for each issue, acknowledging that these provisions are often the most contentious aspects of drafting and negotiating an SPA. It addresses the legal principle of caveat emptor (buyer beware) and the need for contractual protection. Key topics explored include the disclosure process, the standard of disclosure, the effect of the parties' knowledge on claims and challenges arising from a split exchange and completion. The checklist also examines remedies for breach of warranty, the distinction from misrepresentation and the applicable measure of damages. It also details common financial and procedural limitations on a seller's liability, such as financial caps, de minimis thresholds, claims baskets, and time limits for notifying and progressing claims.