Anti-Reliance Clauses under Delaware Law: a Primer
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.
Delaware courts have attempted to alleviate that tension by striking a pragmatic compromise. In his seminal 2006 opinion, Abry Partners V, L.P. v. F & W Acquisition, Chief Justice Strine held that sophisticated parties can contractually preclude or limit fraud claims premised on representations or information that do not appear within the body of the parties’ contract. On the other hand, any attempt by sellers to limit or exclude their fraud liability for on-contract misrepresentations is unenforceable on the grounds that it is against Delaware public policy.
Over the past decade, Delaware courts have developed a considerable body of case law applying Abry to an ever-changing set of contractual provisions and factual circumstances. This article provides a brief overview of transactional fraud claims, contractual limitations on fraud liability and the current state of Delaware law regarding the enforceability of those contractual limitations. For a comprehensive discussion of these and related issues, see F. Shrayber & M. Hanson, Anti-Reliance Clauses and Other Contractual Limitations under Delaware Law, 25 Widener L. Rev. 26 (2019).