Revisiting Representation And Warranty Clauses

Clauses related to representations, warranties and indemnifications are widely negotiated clauses of commercial contracts especially in M&A transactions. The interests of the parties to a contract typically do not align with respect to the representation and warranties clause of the contract, which usually comprises a major chunk of the agreement. In M&A transactions, while the seller would potentially like to tighten the scope of the representations and warranties and reduce the potential for inaccuracy and claims of breach, the buyer on the flip side wants the broadest set possible to insulate itself from risks. The representations differ case to case, based on particulars such as size and nature of the target company, stake being acquired, type of investors and the risk appetite of the parties involved. Representations and warranties are typically backed by an indemnity from the party providing them. Thus, the party may be liable for an indemnity claim by the