Purpose of a contract warranty
In usual course the Vendor will provide a contract warranty under a Jersey SVA for the purpose of providing protection for the Purchaser against the risk of unknown liabilities. They will provide written assurances from the Vendor to the Purchaser as to the condition of the company, business or asset that is being purchased.
Remedy for breach of a contract warranty
In circumstances where the Purchaser discovers after completion that assurances are shown to be untrue, the Purchaser will have a claim for contractual damages to the extent that it can prove loss resulting from the breach of warranty.
Purpose of a representation
A representation is a statement of fact made by the Vendor which induces the buyer to enter into the contract.
Remedy for breach of representations
In circumstances where the representation is untrue, the Purchaser may make an application to set aside the contract and/or claim damages for any resulting loss. An award of damages in this case is to restore the Purchaser to the position that it would have enjoyed had the misrepresentation never been made.
Can a Jersey contractual warranty also amount to a representation?
The Purchaser’s lawyers will often draft an SVA on the basis that the warranties are also representations. As such, in these circumstances the Purchaser may have a claim under both heads.
What happens if the Vendor’s lawyer removes reference to the warranties also being representations?
There is scant authority in Jersey on the issues as to the impact and implications as to the removal of mention of representations from the SVA. If one looks in to United Kingdom Court decisions on the subject, the question appears not to have been resolved. The closest to a clarifying decision was in the case of Indemitsu Kosan v Sumitomo. This case determined that if mention of representation was removed from the SVA it was held not be actionable as a misrepresentation. The Purchaser could only action on warranty breach. Whilst the decision appears sound, this case was heard in the High Court and, as such, is not necessarily a final determiner of the position.
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For further information on breach of contractual warranties and or representations contact the Parslows Jersey litigation team on + 44 01534 630530.