Representations, Warranties and Indemnities in M&A - Projectfusion

Representations, Warranties and Indemnities in M&A

You just bought a company, and then you find out that a key piece of code doesn’t below to your new business (e.g. see the Skype lawsuits). Representations, Warranties & indemnities are the contractual tools that buyers and sellers use in M&A (Mergers and Acquisitions) to derisk these situations.Locked M&A Contract image

In the US, the terms representations and warranties are used almost interchangeably. Under English law there are strong differences. A warranty is a promise that a statement is true, so breaching warranty usually gives rise to claims for breach of contract. A representation in M&A means you can be liable for misrepresentation, which has potentially much higher costs.

Here’s a great introduction from a US firm:

And here’s detailed coverage of the difference between representations and warranties from from UK firm