Whether you’re buying or selling a business, representations and warranties are among the most important and most negotiated provisions in any purchase agreement. These statements form the foundation of trust between the parties and significantly impact the risk allocation in a transaction.
At Hadri Law, we help clients on both sides of the deal understand what they are committing to, how to protect themselves, and how to negotiate fair and enforceable terms.
What Are Representations and Warranties?
In the context of an M&A deal:
- Representations are factual statements made by a party about the business as of a specific date (usually the signing or closing date).
- Warranties are promises that those statements are true—and if they’re not, the other party may have the right to seek compensation.
They can cover everything from the financial condition of the company to its compliance with laws, ownership of assets, employment matters, and pending litigation.
Why They Matter
Buyers use representations and warranties to:
- Confirm what they are buying is as advertised
- Identify red flags that may impact price or structure
- Establish legal grounds for a post-closing claim if something is incorrect
Sellers want to:
- Limit their liability exposure
- Avoid disputes post-closing
- Ensure that they’re not held responsible for unknown issues outside their control
Common Examples
Here are a few standard representations and warranties found in most M&A agreements:
| Topic | Typical Representation/Warranty |
| Corporate Authority | The seller has full power to enter into the agreement. |
| Financial Statements | The financials are accurate and prepared according to accounting standards. |
| Compliance | The business is in good standing with applicable laws. |
| Assets & Title | The seller has valid title to all key assets being sold. |
| Litigation | There are no pending or threatened lawsuits. |
| Tax Matters | All tax filings have been made and taxes paid to date. |
| Intellectual Property | The business owns or licenses all required IP, and no infringement exists. |
| Employees | Employee contracts are valid and there are no ongoing disputes. |
Limiting Liability: Disclosures & Survival Periods
Sellers can limit their risk by attaching a Disclosure Schedule, which qualifies the representations and discloses exceptions (e.g., “Except as set out in Schedule A…”).
Agreements also include survival periods, meaning the time after closing during which a buyer can bring a claim. Some reps may survive for 6–24 months; others (like those involving taxes or title) may last longer.
How We Help at Hadri Law
- Buy-side: We perform legal due diligence, flag discrepancies, and draft reps that reflect your understanding of the deal.
- Sell-side: We help you craft truthful, narrow representations that reflect the business reality and reduce your exposure to future claims.
We also advise on indemnity clauses, escrow arrangements, and insurance (such as Reps & Warranties Insurance) to further manage your post-closing risk.
Final Thoughts
Representations and warranties are far more than just boilerplate legal text—they are critical to assigning risk and building confidence in the deal. Whether you’re buying or selling a business, having experienced legal counsel to guide you through these provisions can make the difference between a smooth transaction and a costly dispute.
Get in touch with Hadri Law for a free consultation about your business legal matters. Call us at 437-974-2374 or email us at contact@hadrilaw.com to begin the process.