Allocating Environmental Risks in the Transaction Agreement


Summary

This practice note discusses the most important contractual provisions for understanding and allocating environmental liabilities in the agreement: environmental representations and warranties, indemnification, and access rights. Upon completion of the environmental due diligence investigation, the buyer should have obtained a solid understanding of the environmental issues requiring attention after operations are acquired. Furthermore, the new information allows the purchaser to intelligently address environmental issues in deal negotiations. The primary way in which environmental information is used in deal negotiations is to enable the parties to allocate financial responsibility between each other and to make sound business decisions in the context of the overall transaction. This allocation may occur in several ways. For example, the parties may negotiate a different purchase price or may change the structure of the transaction. Alternatively, the seller may agree to pay for some,...