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InLearning Curve (NE) Group Ltd v Lewis [2025] EWHC 1889 (Comm)the High Court found that a buyer's right to bring a claim under an indemnity did not preclude a claim for breach of warranty.
In this case, the buyer had received payment under an indemnity but also brought a separate claim for breach of warranty arguing that the underlying issue had a much wider and longer-lasting impact than that permitted under the indemnity claim.
Usually, an indemnity is considered more "buyer-friendly" because it allows the recovery of all loss flowing from the specified liability without having to prove breach, foreseeability or causation. For many, an indemnity will yield a better result as an entitlement to monetary compensation rather than an entitlement to a claim.
Indemnity vs warranty
In this case however, the liability under the indemnity was specific, narrowly drafted and subject to a lower cap than that for the defendant's liability for breach of warranty which would be based on the principle that the buyer should be put in the position it would have been in had the warranties been true.
The sellers denied breach of warranty and argued (amongst other matters) that the indemnity payment was the buyer's sole remedy. This was rejected by the High Court as the negotiated terms were considered sufficiently clear that there was no such basis, noting as follows:
- While there is a "no double recovery" clause, this did not prevent the buyer from pursuing either claim and simply prevented it from recovering more than once in relation to the same matter.
- The difference in caps on the defendants' liability for each claim acknowledges that one may be greater than the other.
- The indemnity was expressed to be "Without prejudice to any other rights or remedies available to the [Buyer]".
- The warranties were expressly stated "not limited or restricted by reference to or inference from...any other term of [the SPA]".
While the buyer could not recover under both claims for the same loss, it elected for damages under the warranty claim which was significantly more that that paid under the indemnity.
This is a cautionary tale for those holding the pen that negotiated terms should be considered carefully as the courts will be reluctant to amend or imply terms where express provisions make it clear.
For buyers, warranties should protect against general or unknown risks, and indemnities should be drafted widely enough to capture all foreseeable consequences of a known issue.
For sellers, indemnities should be tightly defined so as to prevent them from becoming an open-ended route to damages.
Above all else, the drafting should reflect the parties' intentions and be consistent throughout otherwise you may find that an indemnity is drafted so narrowly that a warranty claim might end up being more valuable and leave you open to a much larger claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
