Module 6

From findings to deal protection: price, conditions, indemnities and warranties

A finding has no value until something is done with it. The deal documents are where diligence turns into protection, and the lawyer’s skill is in matching each finding to the right tool. There are six responses. If the problem is fatal, walk away. If it is quantifiable, adjust the price. If it can be fixed, make the fix a condition of closing. If it is known and could be costly, ask for a specific indemnity. If it is unknown or unlikely, rely on the general warranties. If it is small, accept it. The choice depends on what is known, what is curable, how large the loss could be and what the seller will agree. This module explains each response and the supporting devices: disclosure against the warranties, the effect of the buyer’s knowledge, caps and baskets, time limits, retentions and insurance. It does not give the law of any country; rules on disclosure, knowledge and damages vary, and the document must be drafted for the law that governs it. The Risk Allocator takes a list of findings and proposes a response to each, with its reasons, so that you can see the logic and argue with it.

General education on legal due diligence, using invented companies, contracts, people and figures. It states common practice in simplified form and does not describe any one country's law, which differs and changes; rules on disclosure, the effect of a buyer's knowledge, privilege, data protection, competition law and liability in particular vary. It is not legal advice, and it does not replace advice from a qualified lawyer on a real transaction.