Summary
Summary PA SGS 6 notes
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Summary of 12 pages for the course Private Acquisitions at BPP (BPP LPC SGS 6)
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Clause Amendment? (buyer’s view) Reason/comment/seller’s povDefinition of ‘disclosed’ ‘fully and fairly disclosed (with sufficient The buyer’s solicitor should require that the wording of the Agreement is
details to identify the nature and scope of amended so that it states that disclosure must be fair. Although some case
the matter disclosed) in or under the law has suggested that disclosure will not operate to qualify the warranties
Disclosure Letter, this Agreement or in unless it is fair, more recent case of Infiniteland makes it clear that the
any other letter, document, or adequacy of disclosures in any particular case must be assessed
communication expressly referred to in according to the wording in the sale documentation. If the buyer were
the Disclosure Letter.’ to accept disclosure in the rather vague terms set out here it could not later
claim that a particular disclosure was ineffective because it was not ‘fair’.
SO – need to amend it to ensure it is fair throughout the document.
Title guarantee ‘subject to the terms of this Agreement Very important clause – operative clause under which the parties agree to
the Seller shall sell and the Buyer shall buy and sell.
buy the Sale Shares with full title Should have spotted that the Seller has tried to sell with only LIMITED title
guarantee” guarantee. CHANGE TO FULL!
Selling with full title guarantee implies certain covenants for title under the
LP(MP)A 1994, i.e that the seller has the right to dispose of the shares, and
will do all it reasonably can, at its own expense, to pass to the buyer the
title it purports to give, and that the shares are free from all charges,
encumbrances and third party rights other than those of which the seller is
unaware and could not reasonably be expected to know about).
Although on a sale by auction the Seller = strong bargaining position, the
Buyer’s solicitor should NOT accept a limited title guarantee.
Notice of resignation “there is produced the resignation of X as If you know about someone wanting to resign, need to insert their name.
Director (or X) of the Company on terms think about whether buyer client wants to include a further clause requiring
that he shall have no claim against the the Seller to procure that John Peterson signs a settlement agreement
Company whether for compensation for containing enforceable restrictive covenants.
loss of office or otherwise;”
Warranties 1 – Seller warrants “jointly and severally” Only if there is more than 1 seller. Where more than 1 person is giving
responsibility of seller warranties, the Buyer will prefer that the warrantors’ liability is ‘joint and
several’ as this means that the Buyer can choose to sue one of the
warrantors for the whole of its loss arising from a breach by that warrantor
(several liability) or to sue all of the warrantors together (joint liability), thus
increasing its chances of recovering the full amount of damages.
Warranties 2 – claims The Seller “agrees that it will not make This is buyer friendly – this prevents a circular argument where the Buyer
against employee of any claims against any employee of any sues the seller for breach of warranty and then the Seller counterclaims
group company against any employees of the Target company and or/its subsidiaries who
, Group Company in respect of any of the may have assisted, or acted for, the Seller in connection with
Warranties” negotiations for the sale of Eurolearn or in preparing the information to be
given to the Buyer in connection with the purchase.
Warranties 3 – entire The Buyer acknowledges and agrees that: Clauses 6.3(a) (non-reliance) and (b) (contractual remedies only) form
agreement clause ONLY PART of an entire agreement clause, which seeks to limit a
components a) the Warranties are the only Buyer’s potential claim for misrepresentation.
representations, warranties ® For a complete entire agreement clause you would also need a
or other assurances of any whole agreement clause (see Clause 15) and a carve-out for fraud
kind given by or on behalf of (there is no carve-out for fraud in this Agreement).
the Seller and on which the ® If the Buyer subsequently wants to bring a claim for
Buyer may rely in entering misrepresentation it would have to hope that the ruling in Thomas
into this Agreement; Witter is followed and the clause is found unreasonable under the
Misrepresentation Act 1967 (s.3) on the grounds that it attempts to
b) the only remedy available exclude liability for fraud. However, see also the obiter comments of
to it for breach of this Chadwick LJ in the case of Grimstead which expressed the opinion
Agreement shall be for that a carve out for fraud may not be necessary and in any event the
breach of contract under the Buyer may be estopped from claiming misrepresentation.
terms of this Agreement; and ® The Buyer would therefore probably leave it as currently drafted as it
does then give it the opportunity to claim for misrepresentation, but
c) at the time of signing this the Buyer should be made aware that it is not guaranteed to
Agreement it is not actually succeed just because the entire agreement clause is incomplete.
aware of any grounds upon
which it will have the right to The Buyer would probably be comfortable giving the assurance in Clause
bring any claim for breach of 6.3(c) on the basis that if it is aware of any circumstances giving rise to a
any of the Warranties claim, the Buyer will have dealt with this by seeking a reduction in the
against the Seller. consideration or by way of indemnity. We would not advise the Buyer to
complete knowing of the breach.
Warranties 4 – “Breach of Warranty shall not entitle the Does potentially take rights away from the Buyer but in practice recission is
rescission Buyer to rescind this Agreement or any unlikely to be available after completion, as it will not be possible to put the
part of it, after Completion” parties back in the position they were in before completion given that the
Company will have been trading under new management. This means that
the clause = unlikely to have any significance.
Warranties 5 – non Addition of “The benefit of the This should be drawn to the attention of the Buyer although there is nothing
assignment clause Warranties may not be assigned in whole on the facts to suggest that the Buyer would want to transfer Eurolearn to
or in part by the Buyer other than to any another company on completion.
of the Buyer’s subsidiaries, any company
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