Disclosure schedules: Overview, definition, and example
What is a disclosure schedule?
A disclosure schedule is a document attached to a contract that provides detailed information about certain aspects of the agreement. It’s used to disclose specific facts, assets, liabilities, or exceptions that might not be fully covered in the main contract. The purpose of a disclosure schedule is to ensure transparency and help parties understand any risks, liabilities, or obligations that might affect the contract.
For example, in a merger or acquisition, the seller may provide a disclosure schedule that outlines all pending legal issues, such as lawsuits, that could impact the deal.
Why are disclosure schedules important?
Disclosure schedules are important because they provide clarity and transparency, reducing the risk of misunderstandings or disputes. By outlining specific details that may not be covered in the main contract, both parties are fully informed about the material facts that could affect the terms of the agreement. For businesses, having accurate and detailed disclosure schedules helps to avoid potential surprises or liabilities down the road.
Understanding disclosure schedules through an example
Let’s say a company is selling its business to another. The seller would provide a disclosure schedule that outlines any existing debts, pending lawsuits, intellectual property rights, or employee agreements that could affect the sale. By disclosing this information upfront, the buyer can assess the potential risks before moving forward with the deal.
In another example, a supplier may provide a disclosure schedule to a retailer, listing any warranties, guarantees, or potential recalls on their products. This helps the retailer understand any risks associated with carrying those products in their store.
An example of a disclosure schedule clause
Here’s how a disclosure schedule clause might appear in a contract:
“The Seller shall provide a Disclosure Schedule, attached hereto as Schedule A, listing all exceptions, liabilities, and material facts related to the business that could affect this Agreement.”
Conclusion
Disclosure schedules are crucial for ensuring that all relevant information is shared between parties in a contract, helping to minimize the risk of future disputes. By including a disclosure schedule, businesses can make sure that they are transparent about any potential issues or risks, leading to a more informed and smooth 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.