Standard Representations And Warranties Share Purchase Agreement

In Sycamore Bidco Ltd v Breslin [2012], the High Court recently considered whether explicit guarantees in a share purchase agreement could also serve as a basis for an action for misrepresentation. U.S. states are divided on whether pre-contractual insurance can form the basis for a claim of an unlawful act for misrepresentation, whether the written agreement contained a full contractual clause and/or a statement of non-confidence. Some states, including New York, generally adopt a “contractual approach” to prevent demanding parties from circumventing the law on the obstacles they have contractually entered into. Pre-contractual insurance. In both jurisdictions, a seller will want to ensure that they can no longer be held responsible for insurances and/or warranties that are not included in the written agreement. Sellers will therefore attempt, without exception, to include in the agreement a “comprehensive contractual clause” and a provision stating that the buyer has not relied on a statement or promise that is not contained in the written agreement (a “declaration of non-confidence”). The wording of such a clause in English-language contracts must be prudent if it is to have the desired effect. Realistically, a well-advised buyer in both jurisdictions will take all necessary steps to ensure that it has recorded in the written agreement all the statements on which it wished to rely and which prompted it to enter into the written agreement. It is therefore not surprising that a false claim based on a statement that was not included as collateral in the written agreement is quite rare for British practice.

In Britain, entire contractual clauses and declarations of non-confidence are hardly contested. A well-advised seller in the United States will also endeavor to expressly exclude any unauthorized remedies available for misrepresented representations. Contrary to UK practice, factual claims are likely to continue to be referred to as “assurances” and “guarantees”, even in circumstances where the parties explicitly exclude unauthorized remedies that might otherwise be available for mis-presented submissions. It just seems like a matter of habit. In the United States, without exception, the practice is to require that guarantees and assurances be repeated as at the time of conclusion and, as a general rule, the accuracy of guarantees/guarantees at conclusion is a prerequisite for conclusion. While in Britain it is not uncommon for guarantees to be repeated at the time of conclusion, sellers will try to oppose this principle and, in the worst case, to argue for the repetition only of guarantees over which they have direct control. As has already been said, the position of U.S. states on the issue of buyers` knowledge varies. The first New York case on buyer knowledge is the Ziff-Davis case. The seller provided assurances and guarantees as to the financial situation of the division sold to the buyer.

As part of the due diligence on the part of the buyer`s accountants, the buyer learned that the financial situation of the target company was not as presented and justified. Nevertheless, the parties concluded the transaction and the buyer subsequently filed a complaint. The Court finally decided that the buyer had the right to file a complaint for infringement, despite its prior knowledge. The court rejected the argument that the buyer must exercise faith in the truth of the warranties and stated that “the crucial question is not whether the buyer believed in the truth of the promised information,. . . But if [he] believed that he was buying the promise of the [seller],” as far as the truth of the statement is concerned. However, the Tribunal noted three important points: (i) that the parties had an explicit provision in the agreement that the safeguards would “survive the conclusion, notwithstanding an investigation conducted by or on behalf of the other party”; (ii) the parties did not agree before the conclusion of the infringement; and the parties had agreed that the finding “would not constitute a waiver of any rights or defenses” and (iii) that the buyer learned after the signature, but before the conclusion of the infringement.

. . .

This entry was posted in Uncategorized. Bookmark the permalink.