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The minimum threshold amount that must be met before a seller becomes liable for the buyer’s losses caused by the seller’s breach of representations and warranties (reps & warranties).
See Also
Indemnification, representations & warranties.
Tips
Baskets and caps limit the amount of the seller’s exposure when indemnifying a buyer under the reps & warranties. Typically, baskets function in one of two ways. Under a “deductible” basket, the seller is liable only for damages in excess of the threshold amount. If the agreement includes a “first dollar” or “tipping” basket, the seller is liable for all damages once the threshold amount has been reached.
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