The short answer is that it will depend on what the particular agreement requires. But there are some general principles to be drawn from recent case law.

These are:

In Teoco UK Ltd v Aircom Jersey Ltd, (unreported) in April this year the High Court struck out the claim because the claimant buyer's attempted notification of claims relating to the tax affairs of the buyer group of companies, inter alia:

  • Was not clearly a notice of claim under a particular provision of the SPA. It purported to notify a claim but did not specify that it made a claim under the particular SPA provision. Moreover it reserved the buyer's rights, rather than making a demand.
  • Did not identify the particular warranty that had been breached, save in the most general terms. There was a general reference to a tax claim which could have been made either under the Tax Warranty or the Tax Covenant.
  • Even in a later letter that contained detailed financial information in relation to certain claims, the buyer did not elect between a breach of warranty and a claim under the Tax Covenant.

It is noteworthy that in this, and in several other recent decisions which show how easily a buyer's right to pursue a warranty or indemnity claim can be lost, the buyer has attempted reasonably detailed notification of the circumstances that might give rise to a claim, and that a significant amount of work has gone into investigating the potential claims, and reporting them to the seller. Nevertheless the buyer appears to have failed to analyse exactly what the limitation of liability clauses required, and in particular the distinction, (well understood, of course, in an insurance context) between circumstances that might give rise to claim, and notification of a claim, correctly "anchored" to particular SPA breaches.

Contact Kate Menin