Warranty Claims

Warranty Claims

A recent 2023 case in the High Court has underlined the importance of strictly complying with the terms of the share purchase agreement (“SPA”) when bringing a claim for breach of warranty.

Overview

In the case, the High Court considered a breach of warranty claim made by the buyer against the seller of a company. Warranties are contractual statements usually given by a seller to a buyer in a share purchase agreement.

The Court dismissed the buyer’s claim because their “notice of claim” did not fully comply with the requirements set out in the SPA.

The Decision

The SPA stated that any claim for breach of warranty must be served before a specified date and state “in reasonable detail the nature of the [claim] and the amount claimed (detailing the [buyer's] calculation of the [loss] thereby alleged to have been suffered)…". The Court found in favour of the seller because the buyer’s notice failed to notify any claim for loss based on a reduction in the value of shares acquired (this being the normal basis upon which damages for breach of warranty are calculated).

“What might this mean for me?”

If you think you may have a claim for breach of warranty, take legal advice as soon as possible. Do not try and handle it on your own. Warranty claims usually have time limits and failure to comply in full with the requirements of the share purchase agreement when making a claim might (as was the case here) invalidate it.

When agreeing the terms of a share purchase agreement, it is always better for the buyer to keep the requirements of the notice clear, concise and not open to subjective interpretation.

Get in touch

For more information, please contact Simon Arkell.