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Breach Of Warranties And Representations Notes

LPC Law Notes > Private Acquisitions Notes

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A more recent version of these Breach Of Warranties And Representations notes – written by Cambridge And Oxilp And College Of Law students – is available here.

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Breach of Warranties /
Representations TASK

1. What are the warranties within the context of a SPA? What remedies would be available to a buyer for a breach of such warranties???Warranties are contractual statements about what is to be acquired. They are made by the seller in favour of the buyer, covering wide range of aspects of target o E.g. accounts, subsisting contracts, employees, pensions, intellectual property rights, etc. For share acquisition, the warranties will include statements about the shares to be acquired & the target company. o E.g. the shares are not subject to any charges, as well as about the company which is being transferred. If warranties are untrue, buyer will have claim for damages against the warrantor(s) for breach of contract. Rule in Hadley v Baxendale, applies. Loss must fall within one of the two following categories: o loss which flows naturally from the breach; o loss which was fairly and reasonably in the contemplation of both parties, at the time they entered into the contract, as the probable result of the breach..
? Aim is to put the buyer in the position it would have been in if the contract had not been breached, subject to the duty to mitigate.
? This measure of damages allows recovery for loss of bargain.
? Loss = difference between value of shares/asset if the warranty had been true and their actual value.

2. When might a warranty given in a SPA also be a representation? What remedies would be available if such representation subsequently proves to be incorrect??

Representation = statement of fact made by seller to buyer that induces buyer into the contract Likely that any representation made by seller in precontract discussions & negotiations which induce buyer to enter Warranty may be a representation - need to look at the warranty o Promise about title of shares probably induced buyer, however stat books are up to date = warranty, but did it induce the buyer? Needs to be decided on the facts.Remedies = claim for tortious damages & rescission



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