In Ipsos SA v Dentsu Aegis Network Limited  EWHC 1171 (Comm) (the “Ipsos Case”), it was considered whether the buyer (the “Buyer”) had failed to provide the seller (the “Seller”) with a valid notice of its claim for breach of warranty as required in the contractual limitations in the share purchase agreement (the “SPA”), and if this stopped him making a claim.
THE IPSOS CASE
In the SPA the Buyer had a requirement to give the Seller written notice of the claim before the second anniversary of completion, specifying in reasonable detail the nature of the claim, the matter giving rise to the claim and, so far as reasonably practicable, the amount claimed. The Buyer maintained it had given valid notice of the claim by way of two letters that it had written to the Seller in the two-year contractual period.
However, the letters had not referred to a claim notice, nor had they stated that the Buyer was giving notice of a claim for damages for breach of warranty.
As a result, it was found that no valid claim notice had been given within the applicable time limit, and the Buyer’s warranty claim failed as a result.
A LESSON TO BE LEARNT
When warranties are given by a seller in relation to a share or business sale, it is common practice for the seller to negotiate contractual limitations on its liability. These limitations will often include a cut-off date by which the buyer must notify the seller of a potential warranty claim, and a requirement for the buyers’ notice to include reasonable details of its nature and the amount claimed. A key reason for this requirement is so the seller knows in formal terms that a warranty claim is being made and how much money to set aside for it. If such notice is not given then it is likely to be unclear and uninformative. It is important such requirements are included in agreements to make sure clear and concise notice is given.
TAKE CARE WITH YOUR NOTICE
From the Ipsos Case, it is clear the courts are taking a stringent view on what construes notice of a claim. Therefore it is important that the buyer takes care when drafting notice of a breach of warranty.
Authorities suggest that when drafting a breach of warranty notice, it should be considered:
- How it would be understood by a reasonable recipient having knowledge of the context of which it was sent; and
- the notice must specify that a claim is actually being made, rather than indicating the possibility that a claim may be made.
The Ipsos Case is a further reminder of the importance of taking care when preparing a contractual notice of the warranty claim. Failure to ensure the content of the notice satisfies the requirements of a sale agreement could result in the warranty claim being barred. While the detail required by the notice will always be subject to the language used in the SPA clause concerned, the outcome of the Ipsos Case suggest courts will not settle for less than strict compliance with those requirements. Where there is an expressed obligation to state the matter in the notice it is not sufficient that the relevant matter may be inferred.