This clause protects the other party from liability if you could have discovered a problem yourself through proper investigation before signing. It's based on the legal principle that you have a responsibility to do your homework—called "due diligence"—before entering a contract. For example, if you buy a business and later claim the accounts were wrong, the other party can defend themselves by saying "you had accountants review the books; you should have caught this." This clause essentially says: "We're not responsible for problems you could reasonably have found out about."
Accept this clause for most situations, as it's fair and standard in commercial contracts. However, negotiate exceptions for information that was genuinely hidden or that you had no reasonable way to access—for example, undisclosed legal disputes or secret debts. Ask the other party to confirm in writing what information they've made available to you for review, so you can't later be accused of failing to do due diligence on things you never had access to. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause protects the other party from liability if you could have discovered a problem yourself through proper investigation before signing.
Why should I care about this clause?
It's based on the legal principle that you have a responsibility to do your homework—called "due diligence"—before entering a contract.
What are my options?
For example, if you buy a business and later claim the accounts were wrong, the other party can defend themselves by saying "you had accountants review the books; you should have caught this." This clause essentially says: "We're not responsible for problems you could reasonably have found out about."