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: This differs significantly, subject to negotiations and the value of the transaction. It is customary to see a liability cap of around 20-30% of the total purchase price, with fewer instances of a cap of 50% or more.

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

Frequency/market practice: They usually only apply to warranties.

What are the common exceptions to the cap?

Frequency/market practice: Indemnification related to title/fraud/regulatory aspects (when relevant to the business) is usually not capped.

Is a deductible or basket common?

Frequency/market practice: Both are common.

Is a de minimis common?

Frequency/market practice: Very common.

How long does seller liability survive?

Frequency/market practice: A distinction is made between: (i) fundamental representations and warranties, for which the liability duration can be unlimited; and (ii) business representations and warranties, which, except for tax and social security matters (in respect of which) legal limitations usually apply), are generally applicable between 12 – 36 months.

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

Frequency/market practice: Unlimited for fraud and fundamental warranties (title to shares, authority and capacity). Specific indemnities might also be areas on which the seller's liability has fewer limitations/is unlimited.

Is warranty insurance common?

Frequency/market practice: Rarely.