Representations and warranties do three jobs. They establish the basis for indemnification — if it wasn't represented, there's usually no claim. They force seller-side disclosure, because every known exception has to be listed on the disclosure schedules. And they allocate pre-close risk: the seller is responsible for what was true at close, the buyer for what happens after. The "no rep, no claim" rule is the engine — the reps are the only place the buyer captures the seller's promises in enforceable form, which is why the breadth and the qualifiers matter more than almost anything else in the agreement.
§ 01 · The Big SixThe rep categories that matter.
| Category | What it affirms |
|---|---|
| Financial statements | GAAP or consistent modified-cash, no unusual revenue recognition near close |
| Book of business | Client list complete, commission rates accurate, no undisclosed non-renewals or rebates |
| Carrier appointments | Good standing, no termination/reduction notice, contingency terms current |
| Legal & compliance | Licenses current, no inquiries or litigation, no undisclosed E&O past 5 years |
| Employment | Named employees on disclosed terms, producer covenants in force |
| Operations & systems | Management-system data accurate, contracts in good standing, IP owned |
The five-year E&O claim-history rep deserves singling out: demand loss runs for the last five years before signing, and require the rep to affirm those loss runs are complete. E&O is the agency-specific exposure most likely to surface post-close, and the rep plus the loss runs are the buyer's evidence base.
§ 02 · The qualifiersWhat changes enforcement.
Three qualifier categories materially change how a rep enforces. Knowledge qualifiers ("to seller's knowledge") shift the burden to the buyer to prove the seller knew — counter by defining "knowledge" broadly as the actual knowledge of the selling owner and named key employees after reasonable inquiry, and for critical reps like title, tax, and undisclosed E&O, push for flat reps with no knowledge qualifier at all. Materiality qualifiers ("material," "material adverse effect") give the seller room to argue a breach was too small to count. And time qualifiers decide whether the rep speaks as of signing, as of closing, or continuously through closing — the buyer-favorable discipline is closing-date reps that repeat the signing-date reps for all six categories.
§ 03 · The materiality scrapeThe move buyers miss.
The materiality scrape is the buyer-favorable move most don't ask for. It strips materiality qualifiers at the damages-calculation stage: the buyer still has to prove a material breach at the liability stage, but once established, recovery is dollar-for-dollar without the materiality haircut. It can double or triple collectible amounts — and it's invisible to anyone who doesn't know to negotiate for it.
The scrape pairs with the survival and cap structure that makes the reps collectible. Survival scales with rep category — fundamental reps (authority, title, tax, broker fees) survive indefinitely or to the statute of limitations; the general Big Six reps survive 18 to 24 months. The cap follows the same logic: the 10–15% general cap should not apply to fundamental-rep breaches, which are capped at 100% of purchase price to protect against the "seller didn't actually own the asset" scenario. And the basket threshold sits at 0.5–1% of purchase price to eliminate nuisance claims without gutting the recovery right.
§ 04 · The disclosure schedulesThree disciplines.
The disclosure schedules are where the reps meet reality, and three disciplines keep them honest. First, each disclosed exception must reference the specific rep it qualifies — reject a general qualification that covers every rep, because that guts the whole structure. Second, the schedules must update through closing, and any new disclosure that reveals a breach should trigger a walk-away or a specific indemnity. Third, no anti-sandbagging language — a clause that bars the buyer from claiming on breaches it knew about pre-close is one to reject outright, because the buyer paid for the reps and the seller should stand behind them regardless of what diligence turned up. Get the reps broad, the qualifiers narrow, the scrape in, and the schedules disciplined, and the seatbelt actually holds when the deal hits something post-close.
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Terminology on this shelf
- No rep, no claim
- The rule that recovery requires a representation — if it wasn't represented, there's usually no claim absent fraud.
- The Big Six
- The rep categories for an agency deal — financials, book, carriers, legal/compliance, employment, and operations.
- Knowledge qualifier
- "To seller's knowledge" — shifts the burden to the buyer; counter with a broad knowledge definition.
- Materiality scrape
- Stripping materiality qualifiers at the damages stage — dollar-for-dollar recovery once a material breach is proven.
- Disclosure schedules
- The listed exceptions to the reps — each tied to a specific rep, updated through closing.
- Anti-sandbagging
- A clause barring claims on pre-close-known breaches — to reject, because the buyer paid for the reps.