Consequential Damages Redux: An Updated Study of the Ubiquitous and Problematic 'Excluded Losses' Provision in Private Company Acquisition Agreements

36 Pages Posted: 24 Apr 2015 Last revised: 30 Sep 2015

See all articles by Glenn D. West

Glenn D. West

Weil, Gotshal & Manges LLP; Texas Tech University School of Law; SMU Dedman School of Law

Date Written: July 21, 2015

Abstract

An “excluded losses” provision is standard fare as an exception to the scope of indemnification otherwise available for the seller’s breach of representations and warranties in private company acquisition agreements. Sellers’ counsel defend such provisions on the basis of their being “market” and necessary to protect sellers from unreasonable and extraordinary post-closing indemnification claims by buyers. Buyers’ counsel accept such provisions either without much thought or on the basis that the deal dynamics are such that they have little choice but to accept such provisions notwithstanding serious questions about whether such provisions effectively eviscerate the very benefits of the indemnification (with the negotiated caps and deductibles) otherwise bargained-for by buyers. For buyers’ counsel who have given little thought to (or need better responses to the insistent seller’s counsel regarding) the potential impact of the exclusion from indemnifiable losses of “consequential” or “special” damages, “diminution in value,” “incidental” damages, “multiples of earnings,” “lost profits,” and the like, this article is intended to update and supplement (from a practitioner’s perspective) the legal scholarship on these various types of damages in the specific context of the indemnification provisions of private company acquisition agreements.

Keywords: consequential damages, consequential losses, excluded losses provisions, Hadley, lost profits, multiples of earnings, private company acquisition agreements

JEL Classification: K12

Suggested Citation

West, Glenn D., Consequential Damages Redux: An Updated Study of the Ubiquitous and Problematic 'Excluded Losses' Provision in Private Company Acquisition Agreements (July 21, 2015). 70 Bus. Law. 971 (2015), Available at SSRN: https://ssrn.com/abstract=2597364

Glenn D. West (Contact Author)

Weil, Gotshal & Manges LLP ( email )

767 Fifth Avenue
New York, NY 10153
United States
214-746-7780 (Phone)
214-746-7777 (Fax)

Texas Tech University School of Law ( email )

1802 Hartford
Lubbock, TX 79409
United States

SMU Dedman School of Law ( email )

Dallas, TX
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,101
Abstract Views
2,729
Rank
37,546
PlumX Metrics