Cette
page en français 
This page in French
Author:
Jonathon
Wise Polier
Member of the Bars of New York
State and Paris (France)
4 rue de Marignan, 75008 Paris
Telephone: (33) 1 47 23 41 51
/ Fax: (33) 1 47 23 37 93
E-Mail: j-polier@paris-law.com
/ http://www.paris-law.com
(List
of articles in English and French relating to various legal
issues)
An important part of a Purchase and Sale Agreement is devoted to the target's Representations and Warranties. Both the extent and formulations of this article are carefully negotiated between the buyers and the targets American legal counsels.
If they cannot agree, the issue is submitted to their respective clients for a business arbitrations. The business person who decides to concede on a significant point normally is put on notice by his counsel that he is thereby assuming a specific "business risk" against the advice of counsel. Thus, the client can make the ultimate decision after being fully advised of the possible consequences.
Set forth below is a somewhat
typical list of Representations and Warranties.
| Section 1.01 | Organization [of the Seller (the target)] |
| Section 1.02 | Authority to Sell; Effect of Transactions |
| Section 1.03 | Financial Statement |
| Section 1.04 | No Undisclosed Liabilities |
| Section 1.05 | No Adverse Change |
| Section 1.06 | Tangible Personal Property; Title and Liens |
| Section 1.07 | Receivables |
| Section 1.08 | Licenses, Et Cetera |
| Section 1.09 | Contracts and Other Instruments |
| Section 1.10 | Customers, Price Schedules, Rebate Program(s) |
| Section 1.11 | Machinery, Equipment and Accessories |
| Section 1.12 | Employees; Compensation. Benefits |
| Section 1.13 | Compliance with Laws |
| Section 1.14 | Litigation (Actual and Potential) |
| Section 1.15 | Taxes |
| Section 1.16 | Insurance |
| Section 1.17 | Ownership of Necessary Assets and Rights |
| Section 1.18 | Intangible Assets |
| Section 1.19 | Full Disclosure |
| Section 1.20 | No Brokers |
| Section 1.21 | Stockholders |
| Section 1.22 | Non Compete Agreement |
Naturally, each business is unique and the above list will need to be modified for a particular acquisition.
The fact that the target makes broad representations and warranties does not significantly diminish the responsibility of the buyer's legal counsel and CPA to review each of the documents identified by the target. For example the target will list:
each insurance policy and furnish the buyer's counsel with a copy of each policy. Such insurance policy (both current and expired) may need to be reviewed to determine if the coverage was and is adequate.
Certain other contingent liabilities.
each bank lien on inventory, office equipment and real property and furnish the buyer's counsel with a copy of each instrument. Such instruments will need to be reviewed to determine if the permission of the lien holders must (should) be obtained prior to the closing.
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DISCLAIMER The information provided here and on the other pages linked hereto is intended for educational purposes only, and is not legal advice. Particular situations require particular analyses that can only be provided by legal professionals who specialize in the relevant fields and who know all the details of a situation. Also, a presentation such as this does not establish the attorney-client relationship that is necessary in any rendering of legal advice. Finally, one should be aware that the law is a chameleon-like beast that changes its colors frequently, and what holds good today may be reversed by tomorrow. The comments herein should then be read in that light. |