UK: Warranties And Representations Distinguished

Last Updated: 27 October 2016
Article by David Collins, Richard Barham and Candice Chapman

The High Court has considered whether warranties in a share purchase agreement were also representations and could, therefore, found an action for misrepresentation under the Misrepresentation Act 1967.


A representation is a statement of fact by a person which induces another to enter a contract. If the statement proves to be false, the party who entered the contract in reliance on it may have a claim for misrepresentation and the contract may be voidable. A warranty is a contractual promise. If the warrantor breaches that promise, the other party to the contract may have a claim for breach of contract.


The claimant bought from the defendant and one of its subsidiaries the entire issued share capital of a company.

The share purchase agreement stated that:

"Each of the Sellers warrants to the Buyer in respect of itself and its Relevant Shares in the terms of the Warranties in paragraphs 1 and 2 of Schedule 4...on the date of this Agreement."

The agreement defined the "Warranties" as "the warranties given by (i) [seller 1] in Schedule 4 and Part 2 of Schedule 7; and (ii) [seller 2] in paragraphs 1 and 2 of Schedule 4;".

The agreement contained several limitations on the sellers' liability for breach of the Warranties. These included one which precluded recovery for a claim under the Warranties if the buyer did not notify its claim within 18 months of completion.

After that time, the buyer, as claimant, sued the sellers alleging that certain of the warranted matters were untrue at the date of the agreement. The buyer accepted that any claim for breach of the Warranties was time barred. Instead, it brought its claim under section 2(1) of the Misrepresentation Act 1967 arguing that a misrepresentation claim was not time barred by the agreement. The misrepresentation claim had two limbs. The first was that the fact that the Warranties were contractual warranties did not derogate from their inherent quality as representations. The second was that by providing the buyer with an execution copy of the agreement, by offering to sign it or by signing it, the sellers had made pre-contractual representations to the buyer.

The sellers made an application for summary judgment to dismiss the buyer's claim arguing that it had no real prospect of success.


The High Court dismissed the buyer's claim. On the buyer's first argument, the court held if a contract states only that a party gives a warranty, that party does not by concluding the contract make any statement that might found a misrepresentation claim. In so deciding the court followed the earlier High Court decision in Sycamore Bidco Ltd v. Breslin Ltd. [2012] EWHC 3443 in which the court also found that whether an express warranty is also an actionable representation is a matter of construction and that clear contractual language is necessary to achieve that result.

On the buyer's second argument, the court accepted that, in principle, it is possible for language used in a negotiating position, or in draft wording passing between the parties during negotiations, to amount to a pre-contractual representation. However, the court decided that it was artificial and wrong in principle to read the Warranties Schedule in the agreement as if it had a pre-contractual existence independent of its function in the execution copy of the agreement which was to provide content to the Warranties. The sellers' action indicated no more than a willingness to give a certain set of contractual warranties in a concluded contract.


This case reinforces that it is likely to be difficult for a buyer to argue that warranties in a share purchase agreement have effect as representations absent a clear indication that they are to be treated as such.

The case also highlights the importance from a seller's perspective of including a comprehensive entire agreement clause which excludes the seller's liability for any misrepresentation (other than fraudulent misrepresentation). The court found in this case that the entire agreement clause in the agreement between the parties had the effect of excluding the sellers' liability for misrepresentation. So even if it had been successful in its other arguments, the buyer's claim would have failed.

Idemitsu Kosan Co., v. Sumitomo Corporation [2016] EWHC 1909

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