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

Frequency/market practice: Commonly less than 100% in respect of business warranties. Mid-cap and larger deals see lower caps, e.g., 20%–50%.

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

Frequency/market practice: Usually warranties only.

What are the common exceptions to the cap?

Frequency/market practice: Fundamental warranties are often excepted (e.g., title, capitalization, authority). Often tax and specific areas of concern (such as anti-bribery and corruption) are excepted and specific higher caps can be negotiated for them.

Is a deductible or basket common?

Frequency/market practice: Deductible is usually resisted and a tipping basket more common.

Is a de minimis common?

Frequency/market practice: Very common.

How long does seller liability survive?

Frequency/market practice: General survival of 18–24 months is common.

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

Frequency/market practice: It is common to carve out fraud. Tax is commonly longer than general warranties.

Is warranty insurance common?

Frequency/market practice: Warranty insurance is increasingly common, especially in private equity deals.