In M&A transactions, the seller makes representations and warranties to the buyer regarding the business being sold, its ownership, assets, operations, and liabilities.  The seller typically indemnifies the buyer from losses incurred post-closing resulting from inaccuracies in those representations and warranties.  This contractual structure is used by the parties to allocate certain known and unknown

Commercial contracts involve a certain amount of risk allocation between the parties. Indemnity provisions are among the most aggressive risk shifting provisions because they can require a party to assume liability for the mistakes of another.  As a result, Texas courts require indemnity provisions to comply with the Fair Notice Doctrine in order to be