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 depends on the type of deal and the industry of the target. In general, the buyer will ask for 30% to 100% but it is standard to negotiate down. It ranges from 10% to 100% (mostly less than 100%).

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, but it depends on the sophistication of the parties (most commonly applies to the whole agreement, except for fundamental warranties and cases of fraud or gross negligence).

What are the common exceptions to the cap?

Frequency/market practice: Key or fundamental warranties are often excepted (e.g., title, capitalization, authority). Often tax, labor, environmental and specific areas of concern, have specific higher caps. Separate caps can be negotiated. Normally gross negligence and willful misconduct are also excluded.

Is a deductible or basket common?

Frequency/market practice: Both are fairly common.

Is a de minimis common?

Frequency/market practice: Fairly common in larger transactions.

How long does seller liability survive?

Frequency/market practice: A general survival of 12 to 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 liability for key or fundamental warranties. Certain specific areas of concern, e.g., labor, tax, environmental and others, are usually subject to higher caps. Gross negligence and willful misconduct are excluded by law.

Is warranty insurance common?

Frequency/market practice: Rarely seen, although available in Chile and now seen more in certain larger transactions.