Direct Talk

Representations and warranties are where a significant amount of negotiation happens, and where a significant amount of post-closing disputes originate.

Representations and Warranties: Protecting Yourself in Business Sales

When a seller signs a purchase agreement, they are making binding statements about the business. Those statements form part of the foundation the buyer is relying on to close the deal and pay the purchase price. If those statements turn out to be false, the consequences can be significant. It is common for the seller’s owners to make those representations and warranties personally.

If you are buying a business, due diligence is your opportunity to verify that what you are being told about the business is actually true.

Due Diligence Basics: What North Carolina Buyers and Sellers Need to Know

Due diligence is the investigative process that happens after a letter of intent is signed but before the purchase agreement is finalized and the deal closes. The buyer is given access to information about the business so they can confirm what they are buying, identify any problems, and make informed decisions about whether and how to proceed.