Non Reliance Clauses And Evidentiary Rules In Commercial Negotiations
Non reliance clauses bar extra-contractual dispute claims by establishing contractual estoppel against reliance on pre-closing statements.
scheduled representations
Meaning
The factual disclosures and assertions compiled in separate schedules attached to a primary transaction agreement qualify and limit the scope of the seller’s general warranties. These scheduled representations provide a detailed, itemized view of the company’s liabilities, material contracts and asset ownership. They serve to document exceptions to the broad warranties made in the main text.
Transactional Purpose
Buyers rely on these detailed lists to verify the accuracy of the seller’s claims during the final stages of a transaction. If a liability is listed in the scheduled representations, the buyer accepts it as part of the transaction and cannot later claim a breach of warranty for that specific item. This division of responsibility provides clarity for both parties.
Operational Impact
Preparing these lists requires extensive research and collaboration across the company’s legal, financial and operating departments. Because any omission can lead to post-closing lawsuits, assembling the scheduled representations is a highly detailed task that demands substantial managerial attention. This effort occurs weeks before the transaction closes to ensure completeness.
For instance, the company must list every active lease, intellectual property registration and pending lawsuit to prevent subsequent indemnity claims by the buyer.
Allocative Risk
By explicitly detailing exceptions to general statements, the scheduled representations shift the risk of unknown issues to the seller while confirming the buyer’s acceptance of known risks. This balance is critical for pricing the transaction fairly.