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Warranty claims – the importance of following the correct procedure

The case of The Hut Group Limited v Nobahar-Cookson highlighted the importance of complying with the exact requirements set out in share sale agreements.  Another case, IPSOS S.A. v Dentsu Aegis Network Ltd, decided just last month in the High Court, underlined that requirement again.
In this new case, Ipsos had a claim against Aegis under a warranty entered into at the time of a share sale agreement dated 26th July 2011.  The share sale agreement set out specific requirements in the event that Ipsos wanted to pursue Aegis for a breach of warranty.  Aegis wrote letters setting out the basis of the breach of warranty which they argued meant that any reasonable person would have read the letters realising it was the commencement of a warranty claim.
The court held that the share sale agreement had specifically set out that in order to initiate a warranty claim Ipsos had to refer to the specific warranty that it claimed had been breached and that a warranty claim was about to be commenced.  It understood that this requirement had been put into the share sale agreement in order that a company, receiving such a notice would be able to start preparing a defence and making arrangements for the potential liability.  The court held that the letters had not complied with this requirement and therefore struck out Ipsos’s claim.
It is important to take detailed advice before entering into a share sale or purchase agreement and it is equally as important to take detailed advice in the event of claiming a breach of warranty or in defending such a claim.
Contact Andrew Kerr for advice or assistance.