Enforcing Oral M&A Promises: A Cautionary Tale


Explore the legal implications of verbal commitments in M&A negotiations through a real-life case study. Learn from the Management Registry, Inc. v. AW Companies, Inc. case and understand the importance of documenting promises in formal agreements to avoid potential legal disputes.

M&A Stories

November 9, 2023


In the realm of M&A negotiations, promises are often exchanged outside the written agreements, and surprisingly, some of these verbal commitments may hold legal weight.


A noteworthy case from 2017 involved two major industrial staffing firms in a stock deal. During negotiations, the buyer assured Allan, the company president and part owner of the company, that the buyer would sell certain non-industrial divisions in Minnesota to Allan’s wife, Wendy. However, due to logistical reasons, the paperwork for this commitment couldn’t be completed by the main transaction’s closing.


Following the main transaction’s closure, an agreement couldn’t be reached between Wendy and the buyer.

Legal Actions:

This dispute led to a lawsuit in a Minneapolis federal district court. Allan alleged fraudulent inducement by the buyer, claiming that the false promise regarding the sale of non-industrial divisions had led him to sell the company’s stock.

Key Findings:

The buyer sought to dismiss the claim, citing an integration clause in the stock purchase agreement, which stated that the agreement was the final and complete understanding between the parties. However, the court rejected this motion, emphasizing that, under Minnesota law, fraud cannot be waived by contractual disclaimers. Importantly, the court noted that Allan could only legally rely on the buyer’s oral representation if it did not contradict a fact stated in the stock purchase agreement. Since the integration clause made no mention of the non-industrial divisions, Allan was granted a trial on his claim.


This case underscores the importance of not relying solely on oral promises in M&A dealings. The lesson is clear: commit everything to writing. In instances like this, it is advisable to include such promises in the formal agreement or insist on closing both transactions simultaneously.

Case Reference:

Management Registry, Inc. v. AW Companies, Inc, Civil No. 17-5009 (JRT/DTS) United States District Court, D. Minnesota (October 3, 2023).

By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.

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