Buying a business? Warranty and Indemnity Insurance

The fun part of any sale or purchase of a business for the lawyers is negotiating the warranties and a good lawyer is one that has experience in dealing with both buyers and sellers. Here is why a typical buyer will carry out a reasonable amount of due diligence but he will be aware that there will be many things that he is unaware of. He will therefore seek wide and extensive warranties so as to cover as much ground as possible. The warranties that he would seek would typically relate to employment issues, environmental issues, property, tax, accounting, legal/corporate matters etc.

In contrast, the seller will want to be more precise and only provide a warranty where it has to. A breach of a warranty will result in a claim and an inevitable claw back of the money received.

There is a solution to this and that is warranty and indemnity insurance. Whilst this is not something new the use of it is increasing in everyday sale/ purchases.

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