Series 79 practice questionmediumEnvironmental due diligence – indemnity
A buyer insists on an environmental indemnity from the seller for potential past contamination. What is the TYPICAL purpose of this indemnity?
- ATo protect the buyer against costs arising from pre-closing contamination✓ Correct answer
- BTo insure the seller against future environmental fines
- CTo eliminate the need for environmental insurance
- DTo increase the purchase price
Explanation
Why A — To protect the buyer against costs arising from pre-closing contamination
Environmental indemnities protect the buyer from legacy contamination risks that pre-date closing. They do not insure the seller, remove the need for insurance, or increase the purchase price.
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