Representations and warranties
Statements of fact about the business made by the seller in the purchase agreement, which the buyer relies on and can claim against if untrue.
Also called: Reps and warranties · R&W
Reps and warranties are the longest section of most purchase agreements and the one that determines what a seller is still exposed to after closing. They cover ownership of the shares or assets, the accuracy of the financial statements, tax compliance, the validity of material contracts, employment matters, intellectual property, litigation, environmental compliance, and the absence of undisclosed liabilities.
Two drafting devices carry most of the negotiation. Knowledge qualifiers limit a statement to what the seller actually knows — and the definition of knowledge, whether it means actual awareness or awareness after reasonable enquiry, and whose knowledge counts, is a substantive point rather than boilerplate. Materiality qualifiers limit a statement to things above a threshold, which prevents a trivial inaccuracy becoming a claim.
The disclosure schedules are the seller's primary protection and deserve more time than they usually get. A representation is not breached by a fact that was properly disclosed against it. Thorough, specific schedules convert potential claims into known facts the buyer accepted.
Where sellers get caught
- Rushing the disclosure schedules in the closing week. They are the defence.
- Accepting unqualified representations about matters you cannot personally verify.
- Not checking survival periods — how long each category of representation stays claimable.
Common questions
How long do representations survive closing?
General representations commonly survive for around twelve to twenty-four months, while fundamental matters such as title and tax typically survive much longer or for the statutory limitation period. It is negotiated per category.
What is a knowledge qualifier?
Language limiting a statement to the seller's knowledge. Whether that means actual knowledge or knowledge after reasonable enquiry, and which individuals it covers, materially changes your exposure.
Related terms
Indemnification
The contractual obligation to compensate the other party for losses arising from breaches of the agreement or from specified known risks.
Escrow and holdback
A portion of the purchase price kept back at closing to cover claims that arise afterwards, released once the claim period passes.
Representations and warranties insurance
An insurance policy covering losses from breaches of the seller's representations, allowing a smaller escrow and a cleaner exit.
Due diligence
The buyer's post-LOI investigation of the business, covering financial, legal, commercial, tax, and operational matters.
Guides that use this term
Where representations and warranties comes up in a real sale, and what it changes.
Last reviewed 2026-08-25. General information for business owners, not legal, tax, or financial advice — terms, thresholds, and tax treatment vary by jurisdiction and by deal.