Post by @akkydoeslaw

A warranty, representation and indemnity are each a risk allocation tool used in M&A transactions. While all three are about allocating risk between a buyer and seller, they work differently. Warranty: a contractual promise that a statement about the target is true. If it turns out to be false, the buyer can sue for breach of contract, but they have to prove loss, usually that the shares are worth less than they paid. Representation: a statement that induced the buyer to enter the deal. If it's false, the buyer may have a misrepresentation claim, which can mean wider damages or even unwinding the deal. That's why sellers in the UK usually insist everything is given as a warranty, not a representation. Indemnity: a promise to reimburse the buyer pound for pound if a specific known risk materialises, like a tax issue found in due diligence. No need to prove a drop in value, and the seller can't disclose against it. #lawyer #law #corporate #biglaw #trainingcontract