The facts of the case were that Sycamore had acquired a company in Breslin and Dawson for $16.5 million under a share purchase agreement. After the purchase, the buyer discovered errors in the seller accounts on which he had relied when buying the business. The agreement was the subject of a series of explicit guarantees in the stock purchase agreement on the value of the accounts. However, liability for these guarantees was expressly limited. Sycamore Bidco Ltd attempted to argue that these were in fact misrepresentations that brought it into the contract (the liability for these representations was unlimited). The best way to identify the difference between the two is for this to be documented in a written contract that can record all pre-contract submissions and guarantees made at the time the contract was concluded. It is important to remember that a contractual clause is not also treated as a representation and that clear wording is needed if that is the intention, for example, “the seller assures and guarantees that… The Idemitsu Kosan Co Ltd/Sumitomo Co Corp case in 2016 reiterated this point. In this regard, the Tribunal concluded that it was not sufficient for the purpose of the guarantee to be representation; there was no representation because there was no explicit provision to that effect. The fact that the agreement contains a full contractual clause also highlighted the fact that pre-contract agreements, communications or assurances were not invoked or withdrawn prior to their conclusion.
For example, because it is not always possible to take into account every item that should be included in an agreement, a seller may try to limit insurance and warranties to apply only for “essential” things and things and add “knowledge standards” to limit factual assertion to things that the seller knows or should have known. Another option is to limit insurance and coverage that only apply to certain periods (for example. B “in the last three years”).