Agreement on Environmental Liabilities
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A variant of the concept of survival observed in some agreements provides that representation survives until the expiry of the limitation period. This poses a unique problem in the environmental context, as the limitation period under some environmental laws does not begin to run until the environmental problem is discovered. A survival period related to the statute of limitations likely creates a situation in which this representation would survive indefinitely. For example, if an agreement contains the assurance that there is no contamination on the property purchased by the buyer and the representation survives until the expiry of the limitation period, the buyer could probably prove a breach of the representation if, 20 years later, contamination attributable to the seller is discovered in the property. Particular attention should be paid to the development of insurance and guarantees. For example, a statement that a seller complies with environmental laws does not protect a buyer alone from contamination of a purchased property. Under the law of most states, the presence of contamination on a property does not in itself constitute a violation of the law. In most cases, a buyer will not receive the protection they are looking for unless there is also assurance that the seller is not required to investigate or remedy the contamination on the property.12 17 See, e.B. Southland Corp.c. Ashland Oil, Inc., 696 F.
Supp. 994, 1001 (D.N.J. 1988) (Noting that a clause in the same state does not in itself relieve the liability of a seller and that there has been no clear transfer released without reference to liabilities similar to cercla). A discharge clause serves to waive a right. In the environmental context, the releasing party generally undertakes not to require the exempted party to cause any damage resulting from environmental conditions on the property. In exchange for an agreement to remedy certain environmental conditions, a party will often seek a full exemption from any future environmental claims that may be invoked under a statute or common law theory. In general, the release provisions are interpreted against the exempted party. The main issue regarding release clauses is their scope and whether the release should cover certain environmental conditions.
For example, some courts require a clear transfer or release of future liabilities similar to cerprarchical.26 In Mardan Corp.c.C.G.C. However, Music Ltd.,27 The Ninth Circuit concluded that an agreement to exempt the seller from claims related in any way to the purchase agreement was broad enough to exclude a CERCLA claim, even if that legal claim is not based on the contract. It is usually up to the financier to determine what the parties intended to do with respect to the scope of a release.28 Agreements that include compensation for environmental matters may also contain certain environmental restrictions: Depending on the type of assets or transactions that are the subject of the transaction, it may be necessary to include certain restrictions in insurance and guarantees. Environmental. especially in terms of materiality and knowledge. For example, a purchase agreement for a highly regulated chemical company would likely include language in statements that the company is and has been in material compliance with all environmental laws, or that the company has complied with regulations, with the exception of violations that cannot reasonably be expected to result in significant liabilities for the company. Representations can also be qualified by knowledge. For example, the seller would declare that the assets of his knowledge are free of contamination. Whether and when materiality and knowledge qualifications are appropriate for environmental representations and safeguards depends largely on the nature of the transaction and the parties` tolerance to assume or maintain risks and the strength of their bargaining power.
Annemargaret Connolly is a partner in Washington, D.C. Office of Weil, Gotshal & Manges LLP. She is Weil`s Environmental Practice Leader, Head of Weil`s Climate Change Practice Group, and a member of the company`s Hydraulic Fracturing Working Group. She advises clients on a variety of global environmental compliance and liability issues, particularly in connection with mergers and acquisitions, real estate transfers, financing transactions and infrastructure projects. .