Specific indemnity

Definition

A named risk the seller covers outright, outside the usual limits.

Why It Matters

Diligence turns up things that are neither dealbreakers nor rounding errors: an unfiled sales tax return, a misclassified contractor, a lawsuit still open. Rather than repricing the whole deal, the parties name that one item and the seller carries it, usually without the basket applying and often above the cap, sometimes with money held back against it. This is the mechanism that lets a deal close over a known problem, and it is the first place to look when a finding has no obvious price.

In numbers: Three years of unfiled sales tax returns can be handled with a $150,000 holdback and this clause rather than with a lower price.