Purchase Agreements English Law

However, if the key seller is a financial seller rather than a commercial seller, there will usually be a share purchase agreement between the seller and the buyer, which will define the seller`s basic guarantees and a management guarantee between the target management and the buyer, defining the commercial policy guarantees to be provided by the target management. This reflects the position of fund sellers in Europe, who will only provide basic guarantees to a buyer, since the day-to-day responsibility for running the business has been left to the target management team (who may or may not have a stake in the target company), which is better able to grant commercial guarantees to the buyer. The second shortcoming found in the previous paragraph can be overcome by fruitful negotiations, although it is often difficult. The first defect reflects in the first place the extent to which English law quantifies damages in the event of breach of contract and can only include in the contract explicit compensation from the seller in favour of the purchaser for all losses (including consequential damages) and debts resulting directly or indirectly from a breach of the guarantee/representation. However, it would be exceptional to find such compensation in an English sales contract. As a result, the responsibility for guaranteeing sales contracts appears legally or contractually. The legal guarantee is the liability arising from the absence of the expected qualifications in the product, which are subject to the sales contract, and defects that reduce its value2. Where the share purchase agreement contains a compensation clause, the occurrence of a specific event leading to the seller`s liability provides a sufficient basis for the buyer`s claim. These events may include, for example, the decision to assess the amount of the underpaid tax and the obligation to pay the resulting tax, without the purchaser having to prove other circumstances of the event. In the event that the insurance and guarantees provided in the agreement relate to the qualifications of the companies concerned, not to the shares (due to the fact that shares are the main theme of share purchase contracts), the question of whether these can be considered as specific qualifications (“representations and guarantees”) under Article 219/1 tCO is controversial4.


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