What is Survival Period?
The Short Answer
Survival Period explained simply
The Survival Period defines how long after a business sale closes that the buyer can still hold the seller accountable for the promises they made in the purchase agreement. These promises are called "representations and warranties." Think of it as a limited-time guarantee. Once this period ends, the buyer generally can no longer make claims against the seller for those specific promises, unless fraud is involved.
Real-World Example
The Software Company Sale
Imagine a software company is sold. In the purchase agreement, the seller states that all their software licenses are valid. The Survival Period for this promise is set at 12 months.
Six months after the sale, the buyer discovers that a key software license was actually expired at the time of the sale. Because this is within the 12-month Survival Period, the buyer can make a claim against the seller for this breach of warranty. If the buyer discovered this 13 months after the sale, they generally would not be able to make a claim.
Why this matters
The Survival Period is important for both buyers and sellers. For buyers, it provides a window to discover issues that existed before the sale but only become apparent afterward. It gives them legal recourse if the seller misrepresented something.
For sellers, it provides a clear end date to their potential liability. Once the period expires, they can move on without the ongoing risk of claims related to past promises. It brings finality to the deal.
Always pay close attention to the Survival Period in your purchase agreement. As a buyer, you want enough time to uncover potential issues. As a seller, you want a reasonable limit to your post-sale obligations.
Always pay close attention to the Survival Period in your purchase agreement. As a buyer, you want enough time to uncover potential issues. As a seller, you want a reasonable limit to your post-sale obligations.
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