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Supreme Court Clarifies Fraud Disclaimers

Posted In M&A

RAA Management LLC v. Savage Sports Holdings Inc., C.A. 577, 2011 (May 18, 2012)

It is common in sales of a company to have a non disclosure agreement containing a waiver of any claim, including a fraud claim, by the buyer that is based on any representation not specifically included in the final agreement of sale.  In other words, there may be no reliance on any oral representation or even any written materials unless the final agreement says the buyer is entitled to rely on that representation.  This Delaware Supreme Court decision squarely upholds such provisions.

After all, the result could hardly have been otherwise in this case.  For here, the would be buyer never actually agreed to buy, but only to take a look.  When it found out the facts, it walked away except to demand payment for its expenses.  To let a possible buyer recover expenses based on claims it had disclaimed going into the due diligence room seems unwise.

Tags: M&A