Part I of this Article, published in the September 2016 issue of Dispute Resolution Journal, covered Pre-Contractual Considerations and Purchase Price Adjustments. Part III, to be published in the next issue, will cover Closing Conditions, Fraud and Extra-Contractual Rights, Remedies for Breach and the use of Emergency Arbitration Proceedings.
IV. BREACH OF REPRESENTATION AND WARRANTIES
The crux of any agreement to acquire a business or its assets is the representations and warranties made about the conduct of the business. The buyer relies on these representations to be assured of what it is buying. Typically there tends to be a long and fairly standard list of representations made in acquisition agreements. It would be well beyond the scope of this article to look at all or even most of them. Those that are most likely to give rise to disputes tend to be the following.
• The main equipment and physical assets of the business (as well as real estate and intellectual property).
• The list of material customer contracts and/or purchase orders.
• The level of inventory.
• The accuracy of the financial statements presented.
• The absence of any material adverse change in the business since the most recent financial statements.
• The tax status of the business and its compliance with tax filing obligations.
• The status of employee agreements and benefit plans.