Purchase Agreement Anti-Sandbagging

In everyday language, “sandbags” means hiding or underestimating the strength of one`s own position to gain an advantage over a competitor. This term applies in the context of AMs, when the purchaser learns (as described above) before a breach of representation, warranty or contract is found, but says nothing about it until the agreement is concluded – and then makes a claim for compensation under the contract. In order to clarify the parties` expectations of how to resolve these circumstances, the buyer and seller generally follow one of three approaches to the acquisition agreement: (1) Eliminates knowledge disputes after conclusion. An anti-Sandbag scheme creates an additional obstacle and possible litigation for any claim (i.e., before the parties can obtain the merits of the claim, the issue of the buyer`s knowledge or absence should be resolved). This can be particularly difficult when knowledge is defined (or interpreted) to incorporate any constructive knowledge on the part of the buyer (in addition to actual knowledge). In addition, there may be disagreement about the buyer`s executives or collaborators who will be included in the knowledge pool and on the purposes (for example. B, should an environmental specialist be responsible for knowledge on intellectual property issues?) or (b) what type of disclosure justifies knowledge (for example. B is a temporary remark from the company president about an employment issue, the buyer`s team taking a taxi in a hurry after a whole day). However, in many agreements, the sales contract remains silent on the sandbag. Readers should understand that this article only scratches the surface of the topics that need to be considered and addressed in the AM agreements on claims. Other related issues that need to be considered are not an exhaustive list, but also exclusions from compensation, definitions of knowledge, scrapers, baskets and corks, “mini baskets” or sub-baskets, the lifespan of representations and guarantees, the lifespan of exclusions, basic representations, the impact of “insurance network” rules and the question of whether representation and guaranteed insurance are obtained. Demanding buyers and advisors will often require a “sandbagging” provision (sometimes called “pro sandbagging”) that generally provides that the buyer has the right to seek compensation after the conclusion after a security breach or transaction is closed, regardless of whether or not the buyer was aware of such a breach.

before signing the agreement or closing the transaction.