How M&A Buyers Can Guard Against Extracontractual Fraud

Law360, New York (March 6, 2017, 11:32 AM EST) -- Buyers routinely agree to reliance disclaimers in mergers and acquisitions agreements, which generally provide that the parties entered into the transaction in reliance solely upon the representations expressly stated in the four corners of the agreement. At the same time, buyers increasingly demand fraud carveouts, which generally provide that various limitations in the contract apply "except in cases of fraud." But reliance disclaimers and fraud carveouts exist in inherent tension because the disclaimer appears intended to vitiate extracontractual fraud claims that the fraud carveout purports to preserve.

How will courts interpret these provisions when they conflict? And, in accepting reliance disclaimers,...

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