Warranty Claims

If you have recently acquired an interest in a business and feel that you might have the benefit of a warranty claim, or you have received such a claim, JMW’s experienced solicitors can help you understand your rights and bring or defend any claim for breach of warranty.

Very often sale and purchase agreements place strict time limits upon the bringing of any claim for breach of warranty and so, if you do have concerns, it is important that you act promptly.

To discuss a potential breach of warranty claim, simply call us on 0345 872 6666, or complete our online enquiry form to request a call back at a convenient time.

How JMW Can Help

At JMW, our solicitors have a wealth of expertise in handling warranty claims and are well placed to guide you through the process, whether you are claiming or defending a potential breach of warranty. With JMW being a full service law firm, we are able to work with colleagues from various other departments, including corporate and employment law.

Our goal is to provide cost-effective and efficient services that ensure difficult situations are resolved without unnecessary delays. We will advise you in respect of all of your options and the best way to proceed in your case.

What is a Warranty Claim?

When a sale of a business takes place, whether by way of a sale of shares or assets, the selling party will often provide promises or representations to the purchasers in respect of the company’s affairs. Those promises and representations tend to take the form of ‘warranties’.

Often purchasers of businesses invest considerable sums of money and, with the best will in the world, can only conduct so much due diligence in advance. However, the principle of ‘caveat emptor’ (or buyer beware) offers little protection to purchasers. Warranties help encourage full disclosure by a seller and, ultimately, offer a form of protection in the event that all is not as it seems.

When are Warranties Provided?

Warranties can be provided in respect of any number of matters, but, typically, warranties are provided in relation to the following:

• The seller’s authority to sell the shares or assets in question
• The accuracy of the information provided to the purchaser
• The accuracy of the company’s accounts
• The financial status and conduct of the company’s business since the last published accounts
• The ownership of company assets
• The company’s compliance with relevant laws
• The company’s contractual arrangements
• The existence of any claims against the company
• The payment and calculation of tax by the company

What Happens if Warranties Given are False?

Following a purchase, if it transpires that any warranties provided by a seller were untrue, the purchaser will, generally, be in a position to bring a claim against the seller for ‘breach of warranty’.

When a warranty is given falsely, a purchaser can claim ‘damages’ for breach of warranty. The calculation of the damages payable can be complex, but, as a general principle, the intention is to put the purchaser back in the position that they would have been in had the warranty/warranties in question been true.

For example, where a purchaser warrants that, as at the date of a share sale, there has been no material adverse change in the financial position of a company since the latest published accounts, but it later transpires that the company’s fortunes had in fact declined dramatically, damages would be assessed by comparing the market value of the company ‘as warranted’, which will generally correspond to the price paid, with the true value of the company having regard to the change in fortunes.

What is the Difference Between Warranty Claims and Indemnity Claims?

Warranty claims are to be distinguished from indemnity claims. Indemnities generally provide pound-for-pound compensation in respect of a specifically identified loss, i.e. there is no assessment of the impact upon the value of the price paid for the business.