The most recent nuggets discussed the “what” and “how much” issues on indemnification clauses. Another issue that arises on indemnities is the “when”, that is, how long the seller should indemnify the purchaser. Also known as a survival period, the seller and purchaser should negotiate the length of time that the purchaser will have to make an indemnity claim against the seller. The purchaser wants enough time to allow claims to surface. The seller, on the other hand, wants a limit on the time because the seller does not want to be exposed in perpetuity. On indemnifications for many kinds of representations and warranties, the parties usually agree to a fixed amount of time for the purchaser to bring a claim, whether one year, two years or otherwise. The time for a purchaser to bring some kinds of claims should be tied into the period of time that a third-party with a claim would have to sue, that is, the applicable statute of limitations. There are usually some claims, which relate to representations and warranties that, if incorrect, could have a catastrophic effect on the purchaser, that have no time limits.
ABOUT GLENN D. SOLOMON
Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress
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