Representations & Warranties in a Business Purchase
Representations are the seller’s factual promises about the business — their scope and qualifiers decide whether the buyer has a remedy if something is wrong.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Representations and warranties are the seller’s statements of fact about the business — financials, contracts, litigation, taxes, employees, compliance, and title to assets. If they are false, the buyer’s remedy is usually indemnification.
The negotiation is over scope, how heavily the reps are qualified, whether they are re-confirmed at closing, and which are "fundamental."
Topics to check
A buyer wants broad, flat representations; a seller wants them narrowed by "to seller’s knowledge" and "material" qualifiers. Each qualifier shifts risk to the buyer. Confirm whose knowledge counts and whether any inquiry is required.
Watch for a "materiality scrape" — a provision that reads materiality qualifiers out of the reps when calculating indemnity damages, which favors the buyer.
Warranty (Cornell LII Wex)"Fundamental" reps (organization, authority, title to the assets/shares, taxes, sometimes) usually carry longer survival and a higher cap — often the full purchase price. "General" business reps carry shorter survival and a lower cap. Confirm which reps are treated as fundamental.
The line between fundamental and general is negotiated and directly affects how much the buyer can recover and for how long.
A bring-down condition requires the representations to be true again at closing, and makes the buyer’s obligation to close conditional on that. Without it, a problem discovered between signing and closing may give the buyer no exit.
Check whether the bring-down is qualified by materiality or "material adverse effect," which raises the bar for the buyer to walk.
Key takeaways
- Each "knowledge" and "material" qualifier shifts risk to the buyer.
- A materiality scrape (for damages) favors the buyer; expect the seller to resist it.
- Fundamental reps get longer survival and higher caps than general reps.
- A closing bring-down protects the buyer against changes before closing.
- Confirm whose knowledge counts and whether inquiry is required.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Rep scope, qualifiers, and fundamental-rep treatment are negotiated and deal-specific.
- Indemnity outcomes depend on the exact survival, cap, scrape, and bring-down language.
Frequently asked questions
What are fundamental representations?
Core reps — such as organization, authority, title to the assets or shares, and (often) taxes — that typically survive longer and carry a higher indemnity cap, sometimes up to the full purchase price, because a defect in them goes to the heart of the deal.
What is a materiality scrape?
A provision that ignores materiality qualifiers when determining whether a representation was breached and/or calculating damages, so the buyer can recover smaller losses. It is buyer-favorable and frequently negotiated.
What is a bring-down condition?
A closing condition requiring the seller’s representations to remain true as of closing. It lets the buyer refuse to close (or renegotiate) if something material changes between signing and closing.