Basket

Term Main definition
Basket

In various contracts, including the typical contracts used in mergers and acquisitions, the provision for one party to indemnify the other from losses contains a limitation called the "basket." The basket is a specific limitation on indemnity claims permitted to be made by one party against the other party as provided expressly under an agreement (typically an investment or purchase agreement).

An agreement contains an indemnification provision if the agreement provides that one party may bring indemnity claims against the other.  An indemnification provision contains a "basket" if one party can make a claim against the other only if the aggregate amount of all claims exceeds a specified dollar amount.  The specified dollar amount is the "basket."  A "deductible" basket means that the specified dollar amount is entirely exempt from indemnity claims, and deductibility refer to the fact that only the excess over that amount is subject to being made as an indemnification claim. In a deductible basket, all claims up to the amount of the basket are ignored because they are never a basis to bring an indemnification claim.   The opposite kind of basket is a "threshold" (or "dollar-one") basket, which means that once the specified dollar amount of the basket is exceeded, the indemnified person can recover the full amount of all claims (from the first
dollar, including the amount of the basket).