In negotiating the terms of a sale and purchase agreement, whether for a transfer of shares or business assets of a company, a purchaser will often have to rely on the results of its due diligence and the seller’s warranties. For a purchaser, the process of negotiating warranties serves to encourage the seller to disclose facts and events that may not otherwise be known in the course of its due diligence. Where such disclosures are not made, the purchaser may be able to claim damages as a result of the breach of the warranty.
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