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: 10%–30% as general cap for business warranties. Key business warranties (e.g. tax) may be subject to a separate cap. Fundamental warranties (e.g., title, ownership, authority, good standing, etc.) are usually capped at 100% of the purchase price. Specific indemnities are usually capped at 100% of the risk identified. In addition, a global cap applicable to the whole agreement (covering breach of warranties and specific indemnities but also breach of covenants) usually corresponds to 100% of the purchase price.

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

Frequency/market practice: See above with respect to the cap. Other general liability limitations apply usually just to warranties.

What are the common exceptions to the cap?

Frequency/market practice: No cap and no other limitation apply in case of fraud (fraude) or wilful misconduct (dol).

Is a deductible or basket common?

Frequency/market practice: Both common (50/50).

Is a de minimis common?

Frequency/market practice: Fairly common.

How long does seller liability survive?

Frequency/market practice: 12–36 months for business warranties. Statute of limitations for fundamental warranties (and often for tax warranties) and specific indemnities.

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

Frequency/market practice: No limitation applies in case of seller’s fraud (fraude) or wilful misconduct (dol).

Is warranty insurance common?

Frequency/market practice: More and more frequent, with significant increase in recent years.