“It is true that Delaware has a firm policy against fraud. It is equally true that Delaware prides itself on having and adhering to a body of efficient commercial laws and precedent in which sophisticated contracting parties’ voluntary agreements are enforced as written.”1 Courts applying Delaware law will “enforce clauses which identify the specific information on which a party has relied and foreclose reliance on other information.”2 Delaware decisions addressing anti-reliance clauses “carefully consider the need to strike an appropriate balance between holding sophisticated parties to the terms of their contracts and simultaneously protecting against the abuses of fraud.”3 Therefore, under Delaware law, “a party cannot promise, in a clear integration clause of a negotiated agreement, that it will not rely on promises and representations outside of the agreement and then shirk its own bargain in favor of a ‘but we did rely on those other representations’ fraudulent inducement claim.”4 The Delaware Superior Court’s decision in InfoMedia highlights the significant impact of including anti-reliance provisions in asset purchase agreements and merger agreements.
In InfoMedia, a buyer under an asset purchase agreement (the Purchase Agreement) filed suit against the seller and asserted claims for fraud and misrepresentation in connection with the buyer’s acquisition of service contracts from the buyer pursuant to the Purchase Agreement. The buyer alleged that, during due diligence, it repeatedly inquired with the seller regarding whether any of the seller’s customers had expressed an intent to amend, modify, and/or terminate their contracts. The buyer further alleged that the seller had orally represented on numerous occasions before the execution of the Purchase Agreement that the seller was not aware of any customer that intended to terminate contracts. Two weeks before the parties entered into the Purchase Agreement, the seller learned that a significant client intended to terminate the majority of its contracts with the seller, and was preparing a written notice of the termination. The seller did not advise the buyer of the conversation regarding the termination of material contracts and the seller instructed its employees not to disclose to anyone that the customer intended to terminate the contracts. The seller represented in the Purchase Agreement that it had not received written notice from any customer of an intent to terminate any contracts:
Neither [seller], or to the knowledge of [seller], any other party thereto, … has provided or received any written notice of any material breach or alleged material breach of, audit of, or intention to terminate, amend, or modify (including any material change in anticipated call volume), any Contract.
After the transaction closed, the buyer discovered that the customer intended to terminate its contracts, and brought suit against the seller for fraudulent inducement and negligent misrepresentation, alleging that the seller intentionally concealed the customer’s intent to terminate. The seller alleged it would not have entered the Purchase Agreement if it knew of the customer’s intention to terminate the contracts.