Absence of manipulation: Overview, definition, and example
What is absence of manipulation?
Absence of manipulation refers to a contractual representation or warranty where a party affirms that they have not engaged in any fraudulent, deceptive, or manipulative activities that could unfairly influence a transaction or agreement. This provision is often used in financial, securities, and commercial agreements to ensure fair dealing and compliance with applicable laws.
Why is absence of manipulation important?
The absence of manipulation clause is important because it protects the integrity of transactions and promotes trust between parties. It reassures all parties that the transaction is free from improper practices, such as market manipulation, price fixing, or fraud, which could undermine its validity or fairness.
For businesses, including this clause reduces the risk of disputes and legal challenges, ensuring compliance with laws and maintaining a fair and transparent process.
Understanding absence of manipulation through an example
Imagine a company issuing shares in a public offering. The underwriter requires the company to include an absence of manipulation clause, affirming that the company has not engaged in activities like artificially inflating the stock price before the offering. This reassures investors and regulators that the offering is legitimate and compliant with securities laws.
In another example, a buyer purchasing commodities on a trading platform includes an absence of manipulation clause in the agreement, ensuring the seller has not engaged in activities like hoarding or price-fixing to artificially influence the market price of the goods.
An example of an absence of manipulation clause
Here’s how an absence of manipulation clause might appear in a contract:
“Each Party represents and warrants that, in connection with this Agreement and any related transactions, it has not engaged in any fraudulent, deceptive, or manipulative practices, including but not limited to market manipulation, price fixing, or misleading disclosures, that could unfairly influence the outcome of the transaction or the rights of the other Party.”
Conclusion
An absence of manipulation clause safeguards the fairness and integrity of transactions by ensuring that parties have not engaged in improper or fraudulent activities. Including this provision in contracts fosters trust, reduces legal risks, and promotes compliance with regulatory standards. For businesses, it demonstrates a commitment to ethical practices and transparency, enhancing the credibility of the transaction.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.