The trend to negotiate ever shorter commercial warranty periods continued in 2020.

It is customary in an SPA to agree on limitations to the seller’s liability for warranties. These limitations consist of time limitations, monetary limitations and other specific limitations, such as disclosures. Generally, sellers are keen to obtain as many limitations on, and protections against liability as possible.
Under Hungarian law the limitation period within which an action must be brought for a breach of a commercial warranty is five years. In case of title warranty breach the purchaser may present a claim without any time limit. Sellers will always try to agree in warranty periods that are shorter than these statutory warranty periods.

Limitation of title warranty period

As far as title warranties are concerned, in 84% of the transactions the parties agreed to limit title warranties in time. In 74% of the deals the time limitation of the title warranty was five years or shorter, which in the past few years has become the accepted market practice.

Term of agreed title warranty limitation period

Parties departed from the statutory time limits for commercial warranties in all of our transactions in 2020 and negotiated a term shorter than the statutory five years.

Limitation of commercial warranty period

The trend to negotiate ever shorter commercial warranty periods continued in 2020. In 28% of the transactions a time limit of 18 months or shorter was agreed, while only in 17% of the deals was a period between 25 and 36 months agreed. This is in contrast with previous years and shows the extent to which the balance of power shifted in favour of sellers.

Term of agreed commercial warranty limitation period

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