Basket / Deductible
A contractual threshold below which a buyer cannot recover indemnification for breaches of seller's representations and warranties. The basket aligns indemnification with material rather than trivial breaches.
A basket (sometimes called a "deductible") is a contractual threshold below which a buyer cannot recover indemnification for breaches of seller's representations and warranties. The basket aligns indemnification with material rather than trivial breaches, sparing the parties the cost of disputing small claims.
Two structures
Tipping basket (also called "first-dollar"): once aggregate losses exceed the basket threshold, the buyer recovers all losses from the first dollar, including the threshold amount. Buyer-favorable.
Deductible basket (also called "true deductible" or "non-tipping"): once aggregate losses exceed the threshold, the buyer recovers only the amount above the threshold. The seller permanently retains losses up to the threshold. Seller-favorable.
The choice between structures is one of the most consequential basket-related negotiations.
Per-claim minimums (the "mini-basket" or "de minimis")
Many baskets include a per-claim minimum threshold, claims below the per-claim minimum do not count toward the basket aggregate. Typical mini-basket: $5,000 to $50,000 per claim depending on deal size.
Typical sizing
Basket size is typically 0.5%–1% of enterprise value. Baskets are typically inapplicable to fundamental reps, tax reps, fraud, special indemnities, and (where present) covenants.
The basket structure interacts with RWI retention, most RWI policies have their own retention (typically 0.5% of enterprise value as of 2025), and the basket and retention are often coordinated such that the buyer's economic exposure is uniform from dollar one of loss.
Companion article: Selling Your Business in Texas