Limitations on liability
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Limitations on liability Start Comparison
What is the common cap amount (as a percentage of purchase price)?

Frequency/market practice: It is commonly 10%-20% for warranties (other than key warranties (e.g., title, capitalization, authority)), except for W&I insurance insured transactions where the cap amount for business warranties is commonly EUR 1. Also fairly common is a cap of 100% of the purchase price for the seller's liability under the purchase agreement for all warranties (including key warranties) (subject to certain carve-outs).

Does the cap (and other liability limitations) apply to the whole agreement or just warranties (or particular terms)?

Frequency/market practice: some apply to warranties only others apply to liability for covenants or indemnities.

What are the common exceptions to the cap?

Frequency/market practice: Fundamental warranties are often excepted (e.g., title, capitalization, authority) from the warranty cap. Where there is fraud by the seller, the limitations (including cap) are not applicable.

Is a deductible or basket common?

Frequency/market practice: A deductible is more often resisted and a tipping basket is fairly common.

Is a de minimis common?

Frequency/market practice: Common.

How long does seller liability survive?

Frequency/market practice: A general survival of 18-24 months is fairly common for the business warranties. Tax, social security, and key warranties are commonly longer than general warranties (statute of limitations). Environmental warranties can survive longer—covenants for five years.

Are there any common carve-outs from limitation on seller liability (e.g., fraud, tax, key warranties)?

Frequency/market practice: It is fairly common to explicitly carve out fundamental warranties and fraud.

Is warranty insurance common?

Frequency/market practice: Common.