Drafting Matters: Non-Reliance Provisions Barring Extra-Contractual Fraud Claims Effective in Delaware Only if Drafted as a Clear Statement by the Aggrieved Party

March 04, 2016

It is not unexpected for there to be requirements in consumer contracts that clear formulations of waivers are necessary before a consumer can be deprived of rights. However, under Delaware law similar formality and clarity is necessary in order to divest a sophisticated acquirer of a business, as well as parties to commercial contracts, the ability to rely on extra-contractual representations. Purchase agreements frequently contain provisions that a party is only making the representations contained in the agreement and the counterparty may not rely on any other statements. For the second time in two months, the Delaware Chancery Court has ruled that such statements are ineffective unless the counterparty makes its own clear acknowledgement of non-reliance on extra-contractual statements.

The Delaware Court of Chancery in FdG Logistics LLC v. A&R Logistics Holdings, Inc. (Del. Ch. 2016) clarified recent case law and noted that, although the difference between a disclaimer from the point of view of a party accused of fraud and from the point of view of a counterparty who believes it has been defrauded may seem inconsequential on its face, it is in fact substantively critical. This decision has important implications and should be carefully considered by practitioners when drafting non-reliance and integration provisions.

Read "Drafting Matters: Non-Reliance Provisions Barring Extra-Contractual Fraud Claims Effective in Delaware Only if Drafted as a Clear Statement by the Aggrieved Party."