Q&As

What is the effect of representing (in addition to warranting and undertaking) that the warranties in a share purchase agreement or asset purchase agreement are true?

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Published on LexisPSL on 05/04/2017

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

  • What is the effect of representing (in addition to warranting and undertaking) that the warranties in a share purchase agreement or asset purchase agreement are true?

What is the effect of representing (in addition to warranting and undertaking) that the warranties in a share purchase agreement or asset purchase agreement are true?

The buyer in a share sale or asset sale transaction will often require the seller to ‘represent’ that the warranties are true and accurate so that the buyer may claim the tortious measure of damages under the Misrepresentation Act 1967 (MA 1967), as well as the contractual measure of damages. For the buyer to be in a position to bring a claim for misrepresentation, it must be clear in the wording of the agreement that the seller is also representing in terms of the warranties, and not just warranting in terms of the warranties.

Most sellers’ solicitors will delete such provision requiring the seller to represent the warranties. In any event, most buyers are happy to concede the right to rescind and to rely on the contractual measure of damages.

The seller’s solicitors will also often exclude the buyer’s right to bring a claim for misrepresentation by including an entire agreement clause in the agreement which provides that the buyer acknowledges that he has not entered into the agreement in reliance on any warranties, conditions, representations or undertakings which are not set out in the agreement and that he will not have any claim other than for breach of warranty or

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