Sandbagging Provisions

Summary

This practice note discusses sandbagging provisions in M&A transactions. Sandbagging occurs when a buyer has actual, or constructive, knowledge that a representation or warranty is untrue prior to or on closing and sues the seller afterwards for a breach. Sandbagging clauses in M&A agreements can take the form of pro-sandbagging (favouring the buyer's position) or anti-sandbagging (favouring the seller's position). Many agreements are also silent on the issue of sandbagging, leaving the matter to common law. This practice note discusses the various forms of sandbagging clauses, negotiation tactics and trends in Canada.