Reps Warranty Basket Calculator

Basket and cap structures concentrate R&W liability in substantive claims.

Deal value

Basket %

Cap %

Expected claim

Claim payable to buyer

$1,000,000

Basket threshold

$500,000

Cap limit

$7,500,000

How the math works

Basket = deal × %. Cap = deal × %. Payable = min(claim − basket, cap), floor at 0.

$50M × 1% = $500k basket. $50M × 15% = $7.5M cap. $1.5M claim − $500k = $1M payable.

How to Use

Enter deal value.
Enter basket %.
Enter cap %.
Enter expected claim amount.
Read claim payable to buyer.

Frequently Asked Questions

What is a R&W basket?

Deductible threshold before indemnification obligations kick in. Two types: (1) tipping basket — once claims exceed basket, ALL claims (including pre-basket) are payable. (2) deductible basket — only claims above basket payable. Tipping baskets more buyer-friendly. Typical basket: 0.5-1.5% of purchase price. Purpose: avoid litigation over small claims. Sophisticated deal structuring matters — 50 bps basket difference = $250k on $50M deal.

What is a cap?

Maximum indemnification amount. Typical cap: 10-25% of deal value for general reps, 100% for fundamental reps (title, authority, tax). Caps protect sellers from unlimited exposure. Lower caps = more buyer risk = lower deal price; higher caps = more seller risk = higher deal price. Institutional deals typically have 15-20% cap with carve-outs for specific reps. Fundamental reps often uncapped or capped at 100% — these are non-negotiable.

Individual claim thresholds?

'De minimis' threshold: smallest individual claim that counts toward basket. Typical $25-100k for $50M deal. Prevents nickel-and-dime claims. $5k electrical issue wouldn't count; $100k roof problem would. Reduces buyer discovery effort on trivial items. Combined basket + de minimis structure creates meaningful but not overwhelming claim-ability. Each percentage and threshold adds 50-150 bps of effective risk shift.

R&W insurance integration?

When R&W insurance used, basket is often the insurance retention (buyer bears up to basket, insurance covers above to cap). Cap is insurance policy limit. Sellers prefer R&W because it shifts risk to insurance; buyers sometimes prefer seller-held because insurance disputes harder than seller-direct. R&W premium: 2-4% of coverage. Total cost of insurance + basket typically 1-2% of deal — small price for risk transfer.