Many legal contracts, including purchase agreements, include
multiple instances where the same subject matter may be covered by
both a general provision and a specific provision. To take a simple
example an undisclosed government investigation could be a breach
of both a general “no undisclosed liabilities”
representation and a specific “compliance with laws”
representation. The question of which provision is implicated can
be decisive, such as where the compliance representation is
knowledge-qualified while the undisclosed liabilities
representation is not.
A recent Delaware decision (Reynolds)
highlights the risk of failing to rationalize the intended
hierarchy between general and specific provisions. In this case,
the asset and liability allocation provisions (i.e., which ones are
included/excluded in the asset purchase) included multiple
instances of general categories of assumed liabilities by the buyer
(e.g., “all liabilities for Actions arising out of
