4 ways to limit the liability of the seller

trading companies


How to limit the liability of the seller of a business?

The seller of a business aims to "turn the page" and that he was not claiming responsibility once closed trading operation.

Such claims could turn a good deal into a nightmare.

The "full indemnity" is virtually impossible to achieve. However, can be articulated between the parties a number of mechanisms to limit the liability of the seller of a business.

The limits may be temporary, qualitative or quantitative.

Time limits

Clauses can be established whereby, the seller's obligation to indemnify the buyer as a result of a contingency or a hidden liability outcrop, It is limited to those that appear within a specified period.

Then, problems arising after this period will not affect the seller. After the agreed period, extinguishes the liability of the seller and the buyer no longer entitled to claim.

Often the term is set around three years, so that the buyer was able to perform audits at least two full years.

This is without prejudice to the mandatory rules (and especially the rights of the Tax Agency and Social Security) They are unavailable by the parties.

Qualitative limits

For the seller it can be interesting exclusion from the scope of the compensable indirect, or contingencies that have already been reflected in the price. If not properly concrete terms in the contract, It could be a situation in which the seller would harm doubly: First, in establishing a lower price and secondly, if the risk materialized with the corresponding claim by the buyer.

It is recommended exclusion of loss of profit suffered the buyer (lost profit), it can pose many difficulties of proof (although the burden falls on the last).

Minimum quantitative limits

To simplify operations and avoid a manager buyer "all day" calling for a cracked tile or a failed (real case), minimum liability established franchises: only in the event that the "default" or default on demonstrations Seller exceeds a minimum amount, You can make a claim and enforce payment by the seller. And here must be defined clearly, if the franchise is individual or by a group of non-compliance and what is understood by both.

Maximum quantitative limits

May set a maximum amount for which you can answer the seller, either as an absolute amount, either as a percentage of the purchase price. Then, the buyer will be seeking a guarantee, usually in the form of guarantee or deposit retention as part of the price in the hands of a third party, to ensure that in case of default, at least this limit will have it covered.

Ultimately, there are mechanisms to provide security to the seller of a business and limit liability. Get will depend on having appropriate advice and the distribution of forces when conducting negotiations.

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