Clause primer
Big boy (non-reliance on undisclosed information) clause
Each party acknowledges that the other may hold material information it has not shared, agrees to trade anyway, and releases claims based on that nondisclosure.
Legal information, not legal advice. What a clause does depends on its exact words, the rest of the agreement and the governing law.
Also called: big boy letter, non-reliance and waiver clause. Where you find it: Loan participations and assignments, secondary debt and claims trades, and securities purchases between sophisticated parties.
SAMPLE CLAUSE (INVENTED FOR THIS PRIMER)
Each party acknowledges that the other party may possess information concerning the Transferred Rights, the Borrower or any other person liable for the Transferred Rights (each, a "Recourse Party") that has not been disclosed to it ("Undisclosed Information"). Each party is a sophisticated party, has made its own decision to enter into this Agreement, and has not relied on the other party to disclose any Undisclosed Information. To the extent permitted by law, each party waives and releases any claim against the other party arising from the nondisclosure of Undisclosed Information; provided that nothing in this Section limits any representation, warranty or covenant expressly set out in this Agreement.How it works
Acknowledgment of an information gap
The clause opens by naming the problem: one side may know more about the asset or the obligors than the other. Defining "Recourse Parties" broadly reaches guarantors and other credit support providers.
Sophistication and independent decision
These statements support the release by showing that each side accepted the information gap knowingly.
Mutual waiver and release
The release runs both ways and covers nondisclosure claims only. The phrase "to the extent permitted by law" concedes that some claims, such as certain fraud or securities claims, may survive regardless of what the parties agree.
Proviso preserving the contract
The proviso keeps the express representations, warranties and covenants fully in force. A buyer can therefore still sue on a title or no-prior-transfer warranty even though it gave up claims about what the seller did not tell it.
Why it is there
A seller of a loan, participation or claim is often a lender or financing provider with a long relationship with the borrower and other recourse parties. It may hold confidential or material nonpublic information from that relationship that it cannot or will not share. The clause lets both sides trade and price the asset knowing the gap exists. Because it is usually mutual, it protects whichever party turns out to have known more.
How it works with other clauses
- Representations and warranties: the proviso keeps them intact, so the risk allocated by the clause is limited to what was left unsaid.
- Entire agreement and non-reliance clauses: the big boy clause addresses nondisclosure, while protection against claims based on affirmative misstatements outside the agreement usually depends on a separate non-reliance clause and governing law.
- Fraud: courts may refuse to enforce some fraud releases, so the "to the extent permitted by law" wording matters.
Negotiating it
Who it protects: Usually both parties; in practice, the party with more information.
If it protects you
- Keep the definition of Recourse Parties broad enough to cover guarantors and affiliates.
- Keep the sophistication and independent-decision statements.
- Resist narrowing the release to named categories of information.
If it runs against you
- Standard ask: confirm the clause is mutual and limited to nondisclosure claims.
- Standard ask: include the proviso preserving express representations and warranties.
- Fallback: add a specific representation on any fact you consider essential, such as the outstanding amount or absence of known defenses.
Escalate before accepting: A one-way clause that releases all claims, including claims for breach of the express representations, with no "to the extent permitted by law" qualifier.
What AI explanations get wrong
- Describing the clause as a general release of all claims. Check: read the release language and confirm it is limited to nondisclosure.
- Assuming it bars claims for affirmative misstatements outside the agreement. Check: look for a separate non-reliance clause and consider governing law.
- Overlooking the proviso and concluding the warranties are waived. Check: find the carve-back and confirm which representations it preserves.
Where the law varies
Courts differ on how far a sophisticated party can release claims based on undisclosed information, especially fraud and securities law claims. Whether the clause also defeats claims about extra-contractual statements depends on the governing law and on the wording of any non-reliance clause.
TOOLS
Need a primer like this for a clause in front of you? The Clause Primer Kit, included in All-access, produces one in this format inside the AI tool you already use, with checks built in. For reviewing whole agreements, see the Commercial Contracts Starter Pack.