Limitations on liability | South Africa | Global Private M&A Guide - Limited External Content

What is the common cap amount (as a percentage of purchase price)?

Frequency/market practice: Very common. It is usually 50%-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: Both are seen regularly

What are the common exceptions to the cap?

Frequency/market practice: Key warranties are often excepted (e.g., title, capitalisation, authority). Often, tax and specific areas of concern are also excepted, sometimes with specific higher caps. Separate caps can be negotiated.

Is a deductible or basket common?

Frequency/market practice: Both are fairly common.

Is a de minimis common?

Frequency/market practice: Very common.

How long does seller liability survive?

Frequency/market practice: In terms of common law, it is three years from the date on which a claim arises. In terms of the agreement, this is a heavily negotiated point and depends on the type of warranty that the limitation seeks to cover. This can be anything from six to 36 months for business related warranties and longer for title, tax, environmental and competition-related warranties.

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

Frequency/market practice: Yes, however limitations of liability do not apply in the case of fraud or wilful misrepresentation. Common carve-outs also include tax, environmental and competition-related warranties where a longer period is typically agreed.

Is warranty insurance common?

Frequency/market practice: Yes, especially in the private equity space.

Global Private M&A Guide - Limited External Content

South Africa

Select a topic