Parties that have recently entered into or are entering into share purchase agreements (“SPA”) or asset purchase agreements (“APA”) should ensure they become familiar with the notice provisions contained in the agreement or risk having a legitimate well-grounded claim for breach of warranty fail.

Warranties are contractual statements or assurances given by a seller to a buyer as to a certain state of affairs existing at a given point in time. Warranties given under an agreement are usually set out in a schedule and can cover various different areas including tax, litigation, environmental, title etc.

In the event of a warranty subsequently proving to be untrue, misleading or inaccurate, the buyer may, subject to the matter not being previously disclosed, wish to bring a claim for contractual breach of warranty against the seller for the loss they have suffered as a result of the warranty not proving to be true.

As part of the negotiation of the SPA or APA there will be agreed limitations placed on the seller’s liability under the agreement such as time limits to bring a claim, a minimum single claim value or maximum aggregate value of the seller’s liability as well stipulating the procedures to be followed when bringing a claim.

An often overlooked but nevertheless crucial part of bringing any warranty claim is serving notice of the claim on the other party. The method for which is prescribed in the notice provisions which are typically agreed as part of the negotiation of the SPA or APA. A recent Court of Appeal decision concerning a failed claim for ~3.1 million due to the buyer failing to adhere strictly to such notice provisions serves as a useful reminder that failure to follow such procedures may lead to the fatal failure of your warranty claim.

We advise that you always read the notice provisions of your agreement carefully and if you are in the process of entering an agreement ensure that the notice provisions are not overly complicated or onerous to ensure that your claim is not thwarted before it has begun.