Warranty Share Purchase Agreement

The High Court concluded that no statement had actually been made and that there could be no misrepresentation. In the Tribunal`s view, the relevant statements in the GSO have always been characterized as “guarantees” and not insurance, but furthermore, the proposition that representation could be included in a contract did not work – a misrepresentation should include the presentation before the contract date and not in the contract. However, the right to breach the guarantee was maintained because the accounts had actually been raised, so that there was no real and fair view of the state of the situation and they were deviated from GAAP. The damage caused by the breach of the warranty was therefore assessed, on the basis of damage, as a differential difference between the price paid at the close and its actual value. Due to revenue inflation, the actual value was estimated at $12 million and, as a result, the value of the guarantee was close to $5 million. However, if the right to misrepresentation had been successful, the value of the claim would have been much higher. This guarantee confirms that the information provided by the seller to the buyer about the target company is true and accurate, i.e. who the managers of the business are and when the business was created. The court calculated the likely damages caused by the error above $2..8M, but the seller`s liability under the G.S.O. limited the damage to the discounted final sale price. The court duly awarded the purchase price and allowed Cardamon to recover the $2.4 million paid for Motorplus.

A warranty is a contractual allegation of fact and is presented in a share purchase agreement by the seller to describe different characteristics of the transaction at the time of purchase. Where the share purchase agreement contains a compensation clause, the occurrence of a specific event leading to the seller`s liability provides a sufficient basis for the buyer`s claim. These events may include, for example, the decision to assess the amount of the underpaid tax and the obligation to pay the resulting tax, without the purchaser having to prove other circumstances of the event. The above options are likely to be preferable to closing the sale and rely on a guarantee to recover a lower loss.

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