Fraud carve-out

Definition

The exception that removes every cap on a claim when the seller lied.

Why It Matters

Indemnification is normally bounded by a basket at the bottom, a cap at the top, and a survival period that ends it. The fraud carve-out lifts all three for claims of actual deception, which is why sellers negotiate its wording hard and why buyers should read it before the cap. What counts as fraud is the whole argument: some agreements limit it to knowing misstatements inside the written reps, which is far narrower than fraud as a reader imagines it. Ask which definition you are signing.

In numbers: Under a $250,000 cap, a fraud carve-out is what lets a buyer pursue a $900,000 loss when the seller knowingly hid it.