I just had occasion to consider for the first time, while working on my M&A manuscript, some issues that arise when more than one party makes a set of representations. I’d be happy to hear what you think of the following analysis:
When a set of representations is being made by more than one party, you can address that in the representations lead-in in one of two ways. First, you can have the parties make the representations collectively, as in The Sellers represent to the Buyer and Able, Baker, and Charlie represent to the Buyer. Second, if the representing parties are referred to by means of a collective defined term such as the Shareholders, you can say Each Shareholder represents to the Buyer.
The implications of having each member of a given group make a set of representations rather than the members of that group collectively depends on the nature of those representations. The representations might refer only to facts pertaining to the group member making the representations. For example, a shareholder might make representations regarding its ownership of shares being acquired, with each representation referring to that Shareholder. In the case of any such representations, the group member is making only representations as to itself and wouldn’t be liable for inaccurate representations made by any other group member as to that other group member. If that’s the nature of the representations, it’s appropriate to help flag that by adding to the lead-in the words as to itself, as in, for example, Each Shareholder represents to the Buyer as to itself.
Alternatively, each group member rather than the group collectively can make a set of representations even if the representations relate to more than just the representing group member. But in that case, saying, for example, Each Seller represents to the Buyer is functionally identical to saying The Sellers represent to the Buyer. It would be clearer to have the group members make the representations collectively, having the lead-in refer to an individual group member only when each group member is making representations only as to itself.
When more than one party is making a set of representations, it’s common practice for drafters to use in the representations lead-in the couplet jointly and severally. But joint and several applies to liability—it means that a given liability can be apportioned equally among the members of a group or can, to a greater extent or entirely, be laid at the door of one or more members of the group, at the discretion of whoever is apportioning the liability. In an acquisition agreement, the place to allocate liability among a group of parties is in the indemnification provisions. Doing so would render it unnecessary—in fact illogical—to have those parties also make their representations jointly and severally. And it follows that the representations lead-in isn’t the place to say that the members of a given group are severally but not jointly liable.