As a buyer, do you rely on verbal representations made by the seller before you engage your lawyer?

In a sale and purchase of shares or assets, the seller and buyer may have been negotiating the deal for some time before they engage their respective lawyers to draft the sale and purchase agreement (“SPA“). The seller may have made verbal representations which the buyer relies on, in deciding to acquire the shares or assets.

It is important that the buyer informs the buyer’s lawyer to include the representations into the SPA, in particular, if the SPA contains an “entire agreement” clause.

An “entire agreement” clause typically provides that the SPA constitutes the entire agreement between the parties and the buyer agrees that it has not relied on or been induced to enter into the SPA by representations and warranties other than as set out in the SPA.

An “entire agreement” clause excludes the representations made by the seller prior to the parties entering into the SPA.

If the representations are important to your decision in acquiring the shares or assets, do make sure that they are contained in the SPA.

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This post was first posted on Linkedin on 26 May 2021.