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When is a warranty also a representation?

24 April 2013

Where a seller of a business gives a ‘warranty’ that certain facts are true (e.g. that accounts are accurate), can the buyer bring a claim for misrepresentation if they’re not?

In a recent case the court found a problem with the word ‘warranty’ when bringing a claim for misrepresentation. The court felt the need to find ‘something more’ in order to turn the warranty into a representation (which would have allowed a claim above the liability cap).

Had the drafting been different (for instance stating that the seller ‘warrants and represents’) then the conclusion might also have been different.

So next time you’re offered a warranty that statements are true – why not also seek a representation, to give yourself a potential alternative claim (an example of a small drafting change that could make a real difference).

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Richard Nicholas

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Partner and Responsible for In House Lawyers

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