Another recent case on warranty claims under a share purchase
agreement highlights once again the importance of ensuring that any
warranty claim is made strictly in accordance with the claims
notification provisions in the agreement. Although every
notification clause turns on its own wording, this High Court
decision is a useful reminder of the principles which the court
Under the terms of the relevant share purchase agreement the
notice of claims clause provided:
"No Seller shall be liable for any Claim unless the
Purchaser has given notice to the Seller of such Claim setting out
reasonable details of the Claim (including the grounds on which it
was based and the Purchaser's good faith estimate of the amount
of the Claim (detailing the Purchaser's calculation of the
loss, liability or damage alleged to have been suffered or
A separate provision required the buyer to give notice to a
seller containing "reasonable details of any matter or thing
of which the Purchaser's Group becomes aware that indicates
that ... the Purchaser has or is likely to have a Claim".
However, it stated that this notice was not "a condition
precedent to the liability of a Seller in relation to a Claim
provided the Claim is notified" as set out above.
The buyer claimed damages for breach of various warranties
contained in the share purchase agreement. The sellers applied to
strike out two heads of the claim, on the basis that the buyer had
not complied with the notification requirements. The buyer relied
on two letters it had written to the sellers in support of its case
that it had given a valid notice of claims.
The court agreed with the sellers that the buyer had not given
valid notice of its claims. In reaching its decision the court gave
a useful summary of legal principles relevant to interpreting
warranty claim notice provisions and made the following
there is a significant difference between notifying a party of
a claim and notifying a party that a claim may be made;
where the agreement requires the buyer to give some level of
detail of the claim, the notice should identify the particular
warranty that is alleged to have been breached and state why, with
some particularisation of the facts on which the alleged breach is
the fundamental purpose of a contractual notice in these types
of circumstances is commercial certainty; and
proper compliance with contractual notice requirements is not a
technical or trivial matter.
Viewed against these requirements, the buyer's letters
failed against the first two. The first letter did not refer to the
notice of claims clause and a reasonable recipient would not have
understood it to be notice of a claim as opposed to notification of
a potential claim. Although the second letter did make an actual
claim, it failed to identify any specific warranties and therefore
did not comply with the requirement to state the grounds on which
the claim was made.
These facts are a reminder that, when drafting a share purchase
agreement, clarity as to the content of a claims notice is
important. As mentioned in the Nobahar-Cookson & Ors v. The
Hut Group Ltd  EWCA Civ 128 case (see
Warranty claims: excluding seller liability), ambiguous
drafting will be construed narrowly. However, beyond that the court
will look for strict compliance with the terms of the contract. As
the court stated, "the touchstone here is commercial
Teoco UK Ltd v. Aircom Jersey 4 Ltd  EWHC (Ch)
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