Anti-Reliance Clauses and Other Contractual Fraud Limitations Under Delaware Law
By Fridrikh V. Shrayber and Morgan J. Hanson
There is an inherent tension in the law between the notion that contracting parties should be held to their bargain and the notion that a party cannot immunize itself from fraud liability in a contract that has been fraudulently procured. That tension routinely manifests itself in corporate acquisition transactions, where sophisticated actors, guided by top-flight advisors, negotiate and draft lengthy contractual provisions that are designed to allocate among them all of the potential risks associated with their transaction. When a party that has bargained away its right to assert a fraud claim brings an action asserting that it was defrauded into consummating the transaction, Delaware courts are understandably hesitant to shift that risk allocation by disregarding the parties’ contractual language. Courts are equally loath, however, to permit a party to invoke the principles of contract law to perpetrate its fraud.
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Click here to read the entire article which will appear in Widener Law Review’s upcoming February 2019 issue. This is a cutting edge issue in the negotiation of M&A transaction documents, and Fred and Morgan were at the forefront in the development of the current state of the law.