What’s the difference between fundamental and general representations?

Purchase agreements look as though every warranty carries equal weight. They do not, and the tiering is deliberate: it reflects which failures destroy the deal’s premise and which are ordinary business risk the buyer accepted.

What usually sits in the fundamental tier

Title to the shares or assets, the seller’s corporate existence and authority to enter the transaction, the capitalisation of the company, and tax. If title fails, the buyer bought nothing — which is why that representation is not sensibly subject to a twelve-month survival period and a cap at ten per cent of the price.

Why tax is treated with the fundamentals

Not because it is conceptually fundamental, but because of timing. A reassessment can arrive years after closing, long past the survival period on ordinary warranties, and in a share purchase the liability sits in the company the buyer now owns. The longer survival is a practical response to how late the problem can appear.

The general tier and what limits it

Representations about customers, contracts, equipment condition, employees, compliance and the accuracy of the financial statements. These typically survive twelve to twenty-four months, sit behind a basket, and are capped at a fraction of the price. That allocation is reasonable — a buyer had the chance to investigate the operating business, and did.

Negotiate which tier things fall into, not only the numbers

Where diligence surfaced a specific worry — an environmental question, an employment claim, a doubtful licence — the useful move is a standalone representation with its own survival and its own cap, rather than arguing the general cap upward. A targeted provision is easier for a seller to accept and far more useful when it is needed.