The product liability risk is tangible in the deal.
If history, documentation and insurance are traceable, warranties, disclosure and indemnity can be drafted appropriately.
Due diligence
Product liability and recall risks in a business acquisition
Product liability in an acquisition: recall history, claims, insurance, warranties and indemnities before signing.
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25 July 2026 · Mag. Bernhard Brandauer, Rechtsanwalt
Product liability and recall risks can significantly change the value of a target. Buyers must look beyond known claims to product lines, supply chains, documentation, insurance and regulatory duties.
This article does not repeat general product liability rules. It shows how product liability, recall history and product safety are reviewed as transaction risks in due diligence and the SPA.
It complements insurance policies, pending proceedings and the SPA warranty catalogue.
Assess the transaction
Assess the risk before signing
Answer two questions on the starting point and contractual readiness.
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Have there been claims, complaints or recall measures?
Even small serial defects can matter in a deal if products remain in the market or documentation is missing.
All paths at a glance
Overview of all answers.
The product liability risk is tangible in the deal.
If history, documentation and insurance are traceable, warranties, disclosure and indemnity can be drafted appropriately.
Recall and product liability need clarification before signing.
For open product lines or unclear cover, the buyer should require concrete documents, provisions, insurance information and indemnity.
Why product liability is a deal risk
Why product liability is a deal risk
Product liability does not only concern current processes. Products made or sold before closing may later cause damage, complaints or recall measures.
For buyers the key question is whether risks have been identified, documented, insured and reflected in the purchase price. Sellers should disclose known cases and product lines transparently rather than rely on general warranties.
Which documents belong to recall history
Which documents belong to recall history
The data room should include claims, complaint statistics, recall documentation, technical reports, supplier information, product safety processes, insurance policies and correspondence with authorities or customers.
For regulated or technically complex products, access after closing to development records, serial numbers, suppliers and customer lists is also important. Without this information, a later recall is hard to control.
How warranties, insurance and indemnity interact
How warranties, insurance and indemnity interact
The SPA should include specific warranties on product safety, known claims, recalls, regulatory proceedings and insurance cover. Known cases belong in the disclosure letter.
An indemnity for pre-closing risks may be appropriate. It must fit with insurance, cooperation and information duties, otherwise disputes over costs and control arise when a case occurs.
Review points
Review product liability in due diligence
The table shows typical review points for buyer and seller.
| Review point | Why it matters | Deal solution |
|---|---|---|
| History History | Claims and complaints | Disclosure |
| Product line Product line | Legacy products remain in market | Indemnity |
| Insurance Insurance | Cover for legacy claims | Policy review |
| Documentation Documentation | Can a recall be managed? | Data handover |
| Authorities Authorities | Reporting and safety issues | Cooperation duty |
Caution: A general product liability warranty is rarely enough where complaints, technical anomalies or recall indicators are already known.
FAQ
Common questions on this topic.
Why is product liability relevant in an acquisition? +
Because damage or recalls may arise after closing although development, production or distribution took place before closing.
What role does insurance play? +
Insurance can mitigate risk, but it does not replace review of cover, exclusions, claims history and notification duties.
How is a known recall risk reflected in the contract? +
Through concrete disclosure, provisions, warranties, indemnity, cooperation duties and clear rules on control of any later recall.
Further reading
Further topics on business acquisition
Topics
Product liabilityRecallProduct safetyInsuranceDue diligence
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