≡ Menu

Dear buyers: Please don’t demand merger-style reps and warranties from your commercial vendors

I sometimes shake my head in wonder at the vendor warranties that some buyers put into their standard terms and conditions of purchase (OK, usually it’s the buyers’ lawyers who are doing the demanding).

These buyers’ standard terms don’t just include the usual vendor warranties that the product or service being purchased will meet the agreed specifications and won’t infringe any third-party intellectual property rights.

No, these buyers purport to want detailed reps and warranties about the vendor and its business, of the kind you’d see in an M&A agreement, such as Google’s 2011 agreement to acquire Motorola’s mobile phone business (scroll down to Article III).

Certainly it’s one thing if you’re buying a company. Then, a comprehensive set of reps and warranties can be an indispensable due-diligence tool.

Likewise if a buyer is committing itself to being dependent on a particular vendor — naturally the buyer will want to get more information about that vendor, including reps and warranties for greater comfort.

But a normal commercial sales contract or purchase order is another thing entirely: An overly-comprehensive set of reps and warranties often won’t really improve the buyer’s real-world position, at least not in any meaningful way.

All that such reps and warranties do is to create more work for the people who have to review and negotiate the contract.

And that, in turn, needlessly slows down getting to signature.

{ 0 comments… add one }

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.