In negotiated acquisition agreements, representations and
warranties provided by the seller are sometimes qualified by the
knowledge of the seller. In such agreements, it is critical to
clearly set out the standards as to what constitutes knowledge of
the seller. According to the 2014 Canadian Private Target M&A Deal Points
Study by the American Bar Association (ABA
Study), 90% of the publicly available acquisition
agreements in 2014 involving Canadian targets and acquirers contain
a defined knowledge standard.
Knowledge qualifiers
Knowledge qualifiers are sought by sellers to minimize their
exposure to liability, especially in relation to representations
and warranties regarding circumstances outside of their control or
which cannot easily be determined. For example, a commonly accepted
practice is to qualify the representation and warranty that there
is no threatened litigation against the seller. The use of the
qualifier in other areas is usually subject to
