Warranties in Share Purchase Agreements

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10 January 2017 Go Back News/Articles

Warranties in Share Purchase Agreements

The case of  Idemitsu Kosan Co Ltd v Sumitomo Co Corp was decided by way of summary judgement.  It held that when a party produced a Share Purchase Agreement in which it is expressly stated that the party is only giving a warranty, this party does not, by concluding the contract, make any statement to the counter party that could be taken as a misrepresentation.

The decision is a reminder as to the importance of suitable wording in the Share Purchase Agreement to cover the question as to whether warranties can also be taken as misrepresentations.  Depending on the circumstances, the remedies for misrepresentation (that is, damages calculated on a tortious basis and possibly rescission) may be preferable to the remedies for breach of contract.

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