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Publication in magazine Bilances Juridiskie Padomi / No. 5 (71), May 2019

Contractual Limitations of Seller’s Liability in Business Sales Transactions (M&A)

If the buyer timely prepares agreement terms that are acceptable to him or are in line with the established practice, the seller will have less corrections to make, which will contribute to the effectiveness of the negotiations.

One of the negotiation topics in each business sales process is the seller’s liability and its boundaries. This issue is relevant, and not only in the context of the agreement text. In fact, it should be addressed as soon as a decision to start the sales or acquisition process of a company (its shares) is made.

An accurate description of the seller’s liability in the agreement text is to some extent beneficial to both parties. Thus, the rules of the game are defined in the event that the seller, for example, fails to fulfil his obligations or provides false representations regarding the company’s position. The agreement text, of course, should be assessed together with what is not expressly stated in the agreement. In fact, what’s not expressly stated in the agreement is sometimes more important than what is stated.

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