Warranties and representations — why it matters

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In Sycamore Bidco Ltd v Breslin, the High Court considered whether express warranties in a share sale agreement could also found an action for misrepresentation. Following completion of a share acquisition, the buyer discovered what it considered to be accounting errors in the pre-transaction audited accounts on which it had relied when agreeing the price for the target company.

The share purchase agreement contained warranties relating to those accounts. The buyer sued for breach of warranties and sought damages for misrepresentation on the basis that those warranties were also false representations which had induced it to buy the target company.

Perhaps the most important distinction between warranties and representations is the basis on which damages are measured. A warranty is a contractual statement or assurance given that a certain state of affairs exists. If the warranty is not true, the buyer may have a claim for breach of contract, the remedy for which is damages calculated on the basis of putting the claimant into the position it would have occupied if the warranty had been performed…

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