Sandbagging, in the field of

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

law, refers to the act of claiming a breach of a contractual representation or warranty despite having known at the time of the contract that it was untrue.

Legal status of sandbagging

United States

Delaware Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacent Del ...

and

New York New York most commonly refers to: * New York City, the most populous city in the United States, located in the state of New York * New York (state), a state in the northeastern United States New York may also refer to: Film and television * '' ...

law both generally permit sandbagging when a contract is silent on the point, whereas

California California is a U.S. state, state in the Western United States, located along the West Coast of the United States, Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the List of states and territori ...

law does not allow it unless the contract explicitly permits it. New York case law indicates that sandbagging is not allowed in cases where the information about the falsehood of the representation or warranty came directly from the seller.

United Kingdom

English English usually refers to: * English language * English people English may also refer to: Peoples, culture, and language * ''English'', an adjective for something of, from, or related to England ** English national ide ...

law provides that "purchaser's knowledge" precludes post-closing remedies for breach of warranty, but that a contract may allow sandbagging based on pre-closing constructive knowledge or imputed knowledge (as opposed to actual knowledge).

Canada

Ontario Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central Ca ...

case law has not dealt with default rules for sandbagging but has indicated that sandbagging may be permitted by contract. The

civil code A civil code is a codification of private law relating to property, family, and obligations. A jurisdiction that has a civil code generally also has a code of civil procedure. In some jurisdictions with a civil code, a number of the core ar ...

Quebec Quebec ( ; )According to the Canadian government, ''Québec'' (with the acute accent) is the official name in Canadian French and ''Quebec'' (without the accent) is the province's official name in Canadian English is one of the thirtee ...

imposes a requirement of

good faith In human interactions, good faith ( la, bona fides) is a sincere intention to be fair, open, and honest, regardless of the outcome of the interaction. Some Latin phrases have lost their literal meaning over centuries, but that is not the case ...

in the exercise of contractual rights which would likely preclude sandbagging.

Japan

The Japanese Civil Code does not allow sandbagging unless the contract explicitly permits it.

References

{{reflist category:Mergers and acquisitions category:Contract law