What you promise the buyer.
WHAT A WARRANTY IS
A statement that something is true.
WHAT HAPPENS IF IT IS NOT
The buyer may claim against you.
WHAT WARRANTIES TYPICALLY COVER
That accounts are accurate That tax affairs are in order That contracts are as described That there is no undisclosed litigation That assets are owned That employment matters are as stated That the business complies with applicable law
WHAT AN INDEMNITY IS
A promise to cover a specific identified risk.
WHY THE DIFFERENCE MATTERS
Indemnities are easier to claim on and they usually cover known issues.
WHAT TO NEGOTIATE
A cap on total liability A time limit for claims A minimum claim threshold What is excluded
WHY A TIME LIMIT
Open-ended exposure after selling is unacceptable.
WHAT DISCLOSURE DOES
Qualifies warranties by revealing what is not true.
WHY IT IS THE SELLER'S PROTECTION
You cannot be claimed against for something you disclosed.
WHAT TO PREPARE
A disclosure letter, thorough and specific.
WHY THOROUGH
Anything not disclosed is warranted.
WHAT TO DISCLOSE
Every known issue, however minor.
WHAT TO BE CAREFUL WITH
Warranting things you cannot verify.
WHAT TO DO
Qualify them by your actual knowledge.
WHAT TO ESTABLISH ABOUT SECURITY
Whether part of the price is retained against claims.
WHAT TO NEGOTIATE
The amount and its release date.
WHAT TO NEVER DO
Sign without legal advice.
