Today's word: BASKETS AND CAPS
Theme for this fortnight: MERGERS & ACQUISITIONS
Theme for this fortnight: MERGERS & ACQUISITIONS
In negotiating
indemnity provisions, the parties sometimes agree that a party need not
indemnify the other unless the damages exceed a minimum amount, called a "basket."
Sometimes baskets are a "true basket," where a seller is not
liable for damages below that amount. Other times, the basket is merely a
"threshold" or "tipping basket," in which
case once that level of damages has been reached, the buyer can seek indemnity
for all of its damages, including for those below the threshold. The parties
may agree that certain liabilities (often for the breach of some of the
representations and warranties) will not exceed a maximum level, called a
"cap."
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