Purchase Agreements

That depends on the agreement's sandbagging clause. A pro-sandbagging clause keeps the buyer's claim even if it learned of the problem in diligence, and an anti-sandbagging clause bars claims over what the buyer knew. When the agreement is silent, the answer can turn on the governing law and the facts, so we address it in writing.

As long as the agreement's survival period allows. Ordinary representations usually survive for a limited time, while ownership, authority and tax representations last longer. Texas law limits how far a contract can shorten the time to sue, with an exception for some larger business sales, so we check survival periods against that rule on smaller deals.

It is a phrase such as "to the seller's knowledge" that limits a representation to what the seller knew, so an unknown problem isn't a breach. The agreement should say whose knowledge counts and whether it includes what those people would have learned through reasonable inquiry. Buyers push for more people and the broader standard, and sellers push the other way.

Only as the agreement allows. Common exits are an unmet closing condition, such as a missing consent, failed financing or a material adverse change in the business, an uncured breach by the other side, or an outside date that passes without a closing. Outside those terms, a party that refuses to close can be liable for breach.