A more recent version of these Representations V Warranties notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
M&A Workshop 5
Types of Disclosure
(Prep Task + Workshop Task)
Standard of Disclosure/adequate disclosure?
1. Levison v Farin = There was no disclosure letter and the clause was given "Save as Disclosed". A clause in this form is primarily designed and intended to require a party who wishes by disclosure to avoid a breach of warranty claim to give specific notice for the purpose of the agreement. Protection by disclosure will not normally be achieved by merely making known the means of knowledge which may or enable the other party to work out certain facts and conclusions. Therefore, disclosure needs to be in a formal form either specific or general disclosure; formal disclosure limits liability if it does not leave the buyer to work it out for themselves.
2. Infiniteland Ltd v Artisan Contracting Ltd = the standard of disclosure needs to be agreed on by the parties in the SPA and therefore how sufficient the disclosure is will depend on what was agreed on the SPA (e.g. full, clear and accurate). The seller will want a low standard of disclosure whereas the buyer will want a higher standard to make sure it gets as much info as it can.
1. Infiniteland Ltd v Artisan Contracting Ltd = There is a difference between actual and imputed knowledge
2. Eurocopy v Teesdale = The actual knowledge of the buyer does not necessarily effectively enable the buyer to bring a claim against the seller for information that is later discovered. Eurocopy puts a question mark on the actual knowledge of the buyer to bring a claim for breach of warranty.
Standard of disclosure:??
Minimum (seller friendly) "save as disclosed" (levison) Middle "Fully, clearly and accurately" (Infiniteland) Maximum (Buyer friendly) "Fully, clearly and accurately disclosed, (with significant details to identify the nature &
scope of the matter disclosed)" (New Hearts)
Breach of warranty: Overviewidentify the relevant warranty is there a breach of warranty on the face of it?
Is there an effective general disclosure -does it meet the necessary standard?
Is there an effective specific disclosure - does it meet the necessary standard?
Does the buyer's knowledge have any effect?
Is the seller's liability limited in the contract?
Jurisdictional variations How does the allocation of risk differ in civil code jurisdictions?
In English Law the principle of Caveat Emptor reigns over the relationship of risk between the parties. In Civil Code Jurisdictions under the principle of Good Faith the parties ought to disclose to each other relevant information which may affect the contract. There is also a higher level of statutory guarantees and warranties that will be implied in the contracts. Important to contact local counsel to determine what the domestic rules are & how they affect the transaction. How does this affect the due diligence process?
M&A Workshop 5 As a result of the principle of Good Faith and the higher number of statutory protection in civil law jurisdictions the DD process will be shorter. How does this affect the drafting of the warranties?
As a result of the principle of Good Faith and the higher number of statutory protection in civil law jurisdictions the drafting of the SPA will be shorter.
Buy the full version of these notes or essay plans and more in our Private Acquisitions Notes.