Breach of warranty claims after business sale

Summary

Warranties are contractual statements about facts or circumstances, breach of which gives rise to a claim for damages but not a right to terminate the contract. M&A warranties form a crucial part of and provide comprehensive protection for buyers, typically including statements about target company's condition whether financial, legal or operationally aspects If you were the buyer of a business and believe that warranties were incorrect, the first thing to do is to carefully check the warranties because commonly warranties have time limits of typically 18-24 months, (generally not tax warranties though) and warranties are often drafted as being subject to disclosure and materiality thresholds. There are often other complexities and considerations where a warranty may have been breached on sale of a business (see more on this below) Some of the most common forms of warranty breach allegations we deal with are :- * Financial Warranties - accuracy of accounts and financial statements and undisclosed liabilities * Operational Warranties - compliance with laws and regulations, especially with a business operating in several jurisdictions * Employee-related issues -covering employment.

Key information

• •Financial Warranties - accuracy of accounts and financial statements and undisclosed liabilities
• •Operational Warranties - compliance with laws and regulations, especially with a business operating in several jurisdictions
• •Employee-related issues -covering employment terms, disputes, and obligations
• •Intellectual property rights - ownership and usage rights.
• •Have you checked any seller disclosure letter? - the breach must not be covered by seller's disclosures.
• •Quantum of loss - what are your losses? Is the other party worth suing? Is there a de minimis threshold for minimum claim value or a basket threshold (a predetermined monetary value or number of claims that must be reached before a warranty provider will process or pay claims)?
• •Causation - did the breach of warranty cause your loss? If so, how can you prove this?
• •Mitigation efforts - have you taken steps to minimise your loss? If not, a court may significantly reduce damages.
• •Have you given notice of the alleged breach? - the SPA may include a formal procedure and contractual time limits.
• •Warranties are contractual statements about facts or circumstances, breach of which gives rise to a claim for damages but not a right to terminate the contract.
• •M&A warranties form a crucial part of and provide comprehensive protection for buyers, typically including statements about target company's condition whether financial, legal or operationally aspects
• •If you were the buyer of a business and believe that warranties were incorrect, the first thing to do is to carefully check the warranties because commonly warranties have time limits of typically 18-24 months, (generally not tax warranties though) and warranties are often drafted as being subject to disclosure and materiality thresholds. There are often other complexities and considerations where a warranty may have been breached on sale of a business (see more on this below)

Practical guidance

• •Source: [Breach of warranty claims after business sale](https://www.taylor-rose.co.uk/posts/breach-of-warranty)

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