Section 22 Environmental Representations and Warranties

• Library: Bus Trans 2005

As a result of the potential for enormous liability under federal, state, and local environmental laws that may exceed the price paid for the business, buyers and sellers of businesses are becoming increasingly concerned with protecting themselves from liability resulting from existing or future contamination of the property being sold. Accordingly, buyers are conducting environmental audits to determine existing environmental problems, and sellers are conducting “footprint” environmental audits to establish a baseline from which post-closing pollution or contamination can be determined and future liability can be clearly allocated among the parties.

Counsel to buyers and sellers are including warranty and indemnification language in contracts to protect their clients from these liabilities or to allocate these liabilities among the parties to the transaction. The following are examples of common environmental representations, warranties, and covenants from the seller:

• Seller is in compliance with all federal, state, and local requirements relating to protection of health or the environment in connection with its ownership and operations of the company or its business

• Seller knows of no wastes that have been generated, transported, recycled, or otherwise handled in any way in the operation of the company or its business

• Seller knows of no on-site or off-site locations where hazardous wastes or substances from the operation of...