DealLawyers.com Blog

Glenn West has an article in Business Law Today on the Chancery Court’s decision in Labyrinth v. Urich, (Del. Ch.; 1/24).  We blogged about that decision back in January and I guess you might consider it “old news” at this point, but one thing I’ve learned is that if Glenn writes something about reliance disclaimers, all deal lawyers would be well advised to read it.  Here’s the conclusion of the article, where Glenn tells you what you need to do when drafting a reliance disclaimer if you want it to be effective against fraud claims:

To defeat extra-contractual fraud claims, (a) actual disclaimers of reliance should be used, not simple “no representations” statements; (b) disclaimers of reliance should be properly placed in the acquisition agreement so that they are coming from the point of view of the buyer; and (c) the disclaimer of reliance should be “robust” (i.e., disclaim reliance on an exhaustive list of things that might be provided or discussed in the lead-up to the execution of the agreement). And, based on Labyrinth, including an independent investigation provision does not necessarily add anything and may in fact do more harm than good, particularly when it suggests that there was a lot of information provided by the seller upon which the buyer relied.

– John Jenkins