This clause says you can only claim compensation if you relied on the other party's statements in a reasonable way. It protects the other party from claims where you ignored obvious red flags or failed to do basic checks. For instance, if a seller tells you their warehouse is "in perfect condition" but you never visit it and later find it's falling apart, this clause might block your claim because a reasonable person would have inspected it first. This is based on the legal principle that you have a duty to protect yourself by checking important facts.
Resist this clause if it's too broad, because it shifts too much burden onto you to verify everything. Negotiate to remove it for critical statements (like financial figures, legal compliance, or ownership). If you must accept it, add language clarifying what "reasonable reliance" means—for example, "reliance is reasonable if the other party is the sole source of the information and you had no practical way to verify it independently." ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause says you can only claim compensation if you relied on the other party's statements in a reasonable way.
Why should I care about this clause?
It protects the other party from claims where you ignored obvious red flags or failed to do basic checks.
What are my options?
For instance, if a seller tells you their warehouse is "in perfect condition" but you never visit it and later find it's falling apart, this clause might block your claim because a reasonable person would have inspected it first.
How does this affect small businesses?
This is based on the legal principle that you have a duty to protect yourself by checking important facts.