Q&As

Is a buyer subject to a duty to mitigate loss where a seller gives warranties on an indemnity basis in a share purchase agreement?

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Published on LexisPSL on 12/04/2017

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Is a buyer subject to a duty to mitigate loss where a seller gives warranties on an indemnity basis in a share purchase agreement?

Is a buyer subject to a duty to mitigate loss where a seller gives warranties on an indemnity basis in a share purchase agreement?

An indemnity is a covenant by the seller to reimburse the buyer for losses arising from a specified event. In contrast to a warranty claim, the buyer does not have to prove breach (rather it simply has to show that the specified event has occurred), the principle of remoteness of damages does not apply and the buyer is not under a duty to mitigate its loss. The buyer is not required to mitigate their loss under an indemnity where the amount claimed under the indemnity constitutes a debt as opposed to damages for breach of contract, see Jervis v Harris. For further information, see Practice Notes: A guide to share purchase agreements—Warranties and indemnities and Warranties and indemnities—share purchase.

It is increasingly common for buyers to seek to put warranties on an indemnity basis by providing that the buyer's remedy for breach

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