Warranty Claims After Selling or Buying a Business: A Practical Guide

Warranty claims are one of the most common sources of dispute following the sale or purchase of a business, often arising months or even years after completion when a problem in the target business first comes to light.

This guide explains what warranties are, how claims arise, the time limits and procedural steps involved, and what both buyers and sellers should do if a claim looks likely. It is written from the perspective of English law and practice in share and business sales, for owners, directors and investors who have been through a sale or acquisition and now face, or are considering bringing, a warranty claim.

This is the main guide in a series. Three companion articles look in more depth at the categories of claim that arise most often, at the distinction between warranty and misrepresentation claims, and at the seller’s position on receipt of a claim notice, and we link to each of them at the relevant point below. They are being published this week so look out for them in the next few days.

What Are Warranties in a Business Sale and Why Do They Matter

Whether a business is sold by way of a share purchase or an asset purchase, the sale agreement will contain a lengthy set of warranties. A warranty is a contractual statement of fact given by the seller about the condition of the business, its accounts, its contracts, its employees, its assets, its compliance with law and a wide range of other matters. The buyer relies on these statements when deciding how much to pay and on what terms, and the warranties allocate risk between the parties for matters not otherwise dealt with by specific price adjustments.

If a warranty turns out to be untrue at the point it was given, the buyer generally has a right to bring a claim for breach of warranty, subject to any contractual limitations in the agreement and to any matters fairly disclosed in the disclosure letter. Warranties are backward looking: they describe the state of affairs at completion, or sometimes at signing and again at completion, rather than promising future performance. That distinction matters a great deal in practice, because many disputes arise from a misunderstanding about what a warranty was actually protecting against.

Warranties exist because every business sale involves an imbalance of information. The seller has run the company and knows more about its historic tax positions, its contracts, its staff arrangements and any latent disputes than a buyer working from a curated data room over a compressed timetable can establish. Warranties bridge that gap in two ways: they flush out information, because a seller who cannot give a warranty cleanly is expected to disclose the underlying issue, and they allocate risk, because if a warranty proves untrue and loss is caused the seller may be liable.

They matter commercially as well as legally. For a buyer, they are often the only real protection against problems due diligence did not uncover, whether an undisclosed liability, a defective asset, an infringement of intellectual property rights or a mis-statement in the accounts. For a seller, they are usually the single biggest source of ongoing exposure after completion, which is why so much time is spent negotiating their scope and the protections that limit liability under them.

The Difference Between Warranties, Indemnities, Representations and the Tax Covenant

Buyers and sellers, and sometimes their advisers, use these terms loosely, but the distinctions have real consequences when a dispute arises, because the route relied upon shapes what has to be proved, what can be recovered, and which contractual limitations apply.

• Warranties are contractual statements of fact. A breach gives rise to a claim for damages, generally measured as the difference between the value of the business as warranted and its actual value given the breach, subject to the usual rules on causation, remoteness and mitigation. A warranty claim is therefore not simply a claim for the cost of putting the problem right, and quantifying loss is often the most contested part of any dispute. Agreements sometimes modify this, for example by specifying pound‑for‑pound recovery for certain tax or specific risk warranties.
• Indemnities are promises to reimburse the buyer, pound for pound, for a specified loss or liability if a defined event occurs. They are typically used for known or anticipated risks identified during due diligence, such as a specific piece of litigation or a known tax exposure. Because an indemnity claim often does not require the buyer to prove loss in the same way, and can displace some of the usual rules on causation and remoteness, indemnities are more favourable to buyers and correspondingly harder to negotiate from sellers.
• Representations are statements of fact made to induce a party to enter into the contract, and if untrue they can give rise to a claim in misrepresentation under the Misrepresentation Act 1967 or at common law, in addition to any warranty claim. Misrepresentation is categorised by the state of mind of the maker of the statement, as fraudulent, negligent or innocent, and that affects both remedy and exposure. The headline differences from a warranty claim are that misrepresentation can in principle allow rescission, though that is rarely realistic once a business has been integrated, and that damages are assessed on a reliance basis, restoring the claimant to its pre-contract position, rather than the expectation basis applying to a warranty claim. Under section 2(1) the burden can also shift to the maker to prove it had reasonable grounds for believing the statement true. Well drafted agreements include entire agreement and non‑reliance wording aimed at limiting misrepresentation claims, although their effectiveness depends on the wording and on the Misrepresentation Act 1967 and Unfair Contract Terms Act 1977, and liability for fraudulent misrepresentation cannot generally be excluded at all.
• The tax covenant, sometimes called a tax deed, is a separate promise by the seller to pay an amount equal to certain pre-completion tax liabilities of the target that were not provided for in the accounts. It sits alongside the tax warranties rather than replacing them, but has its own claim machinery and usually a considerably longer time limit, so a tax issue that looks out of time under the general warranties may still be live under the covenant.

Which category a protection falls into is often the first question we ask when a client comes to us with a potential claim, because it shapes the whole strategy for pursuing or defending it. The same facts will sometimes support more than one route, and choosing between them is a strategic decision rather than a technicality. 

Common Triggers for Warranty Claims After Completion

In our experience advising both buyers and sellers on completed transactions, certain categories of claim recur time and again.

• Tax warranties and undisclosed tax liabilities are among the most frequent, because liabilities can crystallise long after the events giving rise to them and because HMRC can enquire into earlier accounting periods. The recurring themes are PAYE and National Insurance exposure where individuals were treated as self-employed contractors, VAT under-declared or wrongly recovered, research and development relief claims that do not withstand scrutiny, and employee share scheme compliance failures, with Enterprise Management Incentive options a particular trap where the grant process was defective or HMRC was not notified in time.
• Financial and accounts warranties are the subject of claims where the accounts turn out to have understated liabilities, overstated debtors, overvalued stock or work in progress, made inadequate provision for bad debts, or recognised revenue too early. These often surface when the buyer’s accountants prepare completion accounts. Management accounts warranties are commonly more heavily qualified than audited accounts warranties, and that difference can decide whether a claim is viable.
• Undisclosed liabilities, material contracts and change of control generate disputes where a warranty states that all material contracts have been disclosed or that there are no liabilities outside the ordinary course of business. A buyer who discovers a significant supplier dispute, a guarantee given by the target, or an unpaid liability existing at completion will look first to the warranties. Buyers also regularly find that a key contract contained a change of control termination right or required a consent never obtained.
• Employment and pension warranties give rise to claims because employment liabilities tend to be systemic rather than isolated and multiply quickly across a workforce. The recurring problems are misclassification of staff as self-employed contractors, underpaid holiday pay, unpaid bonuses or commission, National Minimum Wage non-compliance, pension auto-enrolment failures and undisclosed grievances or tribunal claims. Because a single status issue can also generate a tax liability, these claims frequently run in parallel with a tax claim, and care is needed to avoid impermissible double recovery.
• Intellectual property, software and data protection warranties matter most where the value of the business lies in software, brands or data. The classic defect is a broken chain of title, where founders developed code before incorporation, contractors were engaged without a written assignment, or an agency retained ownership under its standard terms. Open source used inconsistently with the intended licensing model, licences terminable on a change of control, and domains registered personally by a founder recur too, as do data protection claims concerning UK GDPR compliance, undisclosed personal data breaches and Information Commissioner’s Office enforcement.
• Compliance, litigation and regulatory permissions cover regulatory compliance, health and safety, environmental matters and the absence of undisclosed disputes. A claim commonly arises where, shortly after completion, the buyer receives a notice relating to an issue whose root cause existed before completion but was never flagged. In regulated sectors, claims also arise where licence conditions were breached or permissions lapsed.
• Property, share capital and corporate records account for a further group. Premises may have been occupied without consent, an assignment may have breached the lease, or a dilapidations exposure may not have been identified. Historic allotment defects, undocumented options, unregistered transfers and unlawful distributions arise less often but matter more, because in serious cases they raise questions about title to the shares themselves rather than simply about value.

Recognising which category an issue falls into early helps considerably in assessing the strength of a claim and the arguments the other side will raise. 

Time Limits and Notification Requirements for Warranty Claims

The most important, and most frequently overlooked, aspect of a warranty claim is the strict time limit and notification procedure in the sale agreement. Unlike a general contractual claim, warranty claims are almost always subject to a contractually agreed, and usually much shorter, period.

General business warranties commonly expire between twelve and twenty four months after completion, while tax warranties and the tax covenant typically run longer, often four to seven years, reflecting HMRC’s own enquiry windows. Fundamental warranties as to title and capacity are sometimes subject to a longer period again, or to no contractual limit at all. These periods are individually negotiated, so there is no substitute for checking the actual wording rather than assuming a standard position applies.

Just as important is the notification mechanism. Most agreements require written notice within the relevant period, in a defined manner and to a defined address, setting out reasonable details of the matter, the warranties breached and, often, an estimate of the amount claimed. The courts may approach these clauses strictly where compliance is made a condition of liability, so a notice that is late, sent to the wrong address, served by the wrong method or lacking the prescribed detail may be ineffective even where there has been a real breach and real loss. Many agreements go further and require proceedings to be issued within a further period after notice, commonly six to twelve months, failing which the claim is treated as withdrawn.

Running alongside the contractual regime is the statutory position. Under section 5 of the Limitation Act 1980 the basic period for a claim founded on simple contract is six years from the date the cause of action accrues, which in a warranty claim is commonly the date the warranty was given or repeated, usually completion, rather than the date the buyer discovered the problem. Where the obligation sits in a deed, section 8 may instead give twelve years. The contractual period is almost always shorter and therefore operative, but the statutory position still needs checking, particularly where fraud or deliberate concealment is alleged, since that falls outside the contractual protections altogether.

Anyone who becomes aware of a possible breach, whether the buyer who has discovered the issue or the seller who has just received a letter, should therefore treat the contractual deadlines as an immediate priority. Calculating those dates, and understanding what a notice must contain to be valid, is one of the first things we do when a client contacts us, because getting it wrong can end a claim before it has properly started.

How Warranty Claims Are Typically Brought and Defended

A claim usually begins with the buyer identifying a problem, through its own management, its accountants or a third party complaint, and then working with its solicitors to establish whether it amounts to a breach of one or more warranties. That assessment involves comparing the actual position at completion against the precise wording of each relevant warranty, since warranties are drafted with considerable specificity and small differences in wording can determine whether a claim succeeds.

Once a potential breach is identified, the buyer’s solicitors will prepare a formal letter or notice of claim setting out the warranty said to have been breached, the facts relied upon and an initial assessment of loss. This needs care, because it forms the foundation for everything that follows and a poorly particularised notice can itself be challenged as invalid.

On receipt, sellers will review the disclosure letter to establish whether the matter was fairly disclosed before completion. If it was, that is usually the seller’s strongest defence, because a properly disclosed matter cannot normally found a warranty claim. Whether a matter has been fairly disclosed depends on the disclosure standard set in the agreement and the specificity of the disclosure. Sellers will also consider the caps and financial limits negotiated into the agreement, any de minimis or basket thresholds, and whether the claim was notified in time and in the correct form.

The order in which a seller approaches a claim matters. Testing the validity of the notice before engaging with the underlying facts is usually the more productive sequence, because a procedural defect may dispose of the claim without any need to argue the merits, and because substantive engagement without an express reservation of rights can complicate reliance on a procedural objection later. A short, courteous acknowledgement that the notice is being reviewed with solicitors is almost always a better opening move than an explanation of what the seller knew and why.

Most claims are resolved through negotiation between the parties’ solicitors, often informed by position papers or a without prejudice meeting. Where they cannot be, a claim will typically proceed through the Business and Property Courts, though the venue depends on value and complexity. Given the cost and management time of contested litigation, both sides usually have a strong incentive to settle where a fair outcome can be reached, and early, well informed advice tends to save considerable cost later.

The Role of the Disclosure Letter in Limiting Liability

The disclosure letter is one of the most important documents in any business sale, yet it is often the one clients understand least well when a dispute arises. Given by the seller alongside the agreement, it sets out specific matters, and often attaches a bundle of supporting documents, that qualify the warranties. If a matter has been properly disclosed against a warranty, the buyer cannot generally claim in relation to it, even though the warranty is technically breached, because the buyer is treated as having bought with knowledge of the issue.

Disclosure needs to be fair and specific to be effective. Vague, general disclosure is unlikely to be treated as sufficient, particularly where the agreement specifies a standard the disclosure letter must meet. This is why sellers invest significant time in preparing a thorough letter, and why buyers should scrutinise it before completion rather than treating it as a formality.

The precise standard agreed varies more than most parties expect. Some agreements require a matter to be disclosed in sufficient detail to enable a reasonable buyer to identify its nature and scope, while others deem everything made available in the data room to have been disclosed, which is far more seller-friendly and a position buyers frequently resist. Sellers should be slow to assume that access to a data room is the same thing as disclosure, and buyers should not assume that general awareness of an issue defeats their claim, since unless the agreement expressly says otherwise the buyer’s own knowledge is not automatically a defence.

When a claim is threatened, one of the first steps on both sides is to return to the disclosure letter and bundle to establish precisely what was disclosed and in what terms. Reconstructing that picture accurately, folder by folder if necessary, frequently determines the outcome, which is why we recommend retaining a full and organised copy for as long as the warranty and tax covenant periods remain open.

Financial Limits, Caps and Baskets on Warranty Claims

Sale agreements almost always include financial limitations on warranty claims, and these frequently determine whether a claim is commercially worth pursuing at all.

• An overall cap limits the total recoverable under the warranties, often expressed as a percentage of the purchase price or a fixed sum, usually with carve outs for fundamental warranties such as title and capacity, which may be capped at the full price or left uncapped. Separate and sometimes lower caps often apply to particular categories, so where a claim is notified at a headline figure well above the cap the seller’s practical exposure may be far smaller than the letter suggests.
• A de minimis threshold sets a minimum value below which individual claims cannot be brought, filtering out trivial matters that would not justify the cost of a formal claim. Claims falling below it will not succeed however clear the breach.
• An aggregate basket or threshold requires all claims together to reach a specified figure before any can be brought, sometimes on a first pound basis once reached and sometimes only for the excess, depending on the drafting. The distinction between those two structures can make a significant financial difference.
• No double recovery and third party recoveries provisions prevent the buyer recovering twice for the same loss and typically require it to pursue insurers or other third parties, or to account to the seller for sums recovered. Corresponding savings, such as a tax benefit arising from the same matter, often have to be brought into account, and where the matter has already been reflected in completion accounts, a locked box leakage claim or a price adjustment, recovery under the warranties may be excluded altogether.
• Post-completion conduct and changes in law are commonly carved out, so that losses caused or increased by the buyer’s own actions after completion, by a change in the target’s accounting policies, or by a change in law after the date of the agreement fall outside the seller’s liability. Buyers regularly present figures containing elements falling squarely within these exclusions.
• Time limits, discussed above, operate as a further limitation, since a claim that would otherwise succeed on the merits will still fail if notified, or proceedings issued, outside the agreed periods.

These limitations exist because sellers want certainty that their exposure is not open ended, and buyers accept some limitation as the price of the deal. When assessing a claim, working through each limitation methodically, rather than focusing solely on the underlying facts, is essential to understanding what it is realistically worth.

How Loss Is Calculated in a Warranty Claim

A common misunderstanding, particularly among buyers claiming for the first time, is the assumption that a warranty claim entitles them to recover the cost of putting the problem right. The usual measure is in fact the difference between the actual value of the business at completion, given the breach, and the value it would have had if the warranty had been true, with courts often treating the price paid as evidence of the latter. This diminution in value approach can produce a very different figure from the cost of remedying the issue, particularly where the business was valued on a multiple of earnings, since even a modest reduction in profit translates into a much larger reduction in value once the multiple is applied.

That multiple based argument is frequently advanced but it is not automatic, and whether it succeeds depends on the evidence, the valuation methodology actually used, and whether the effect of the breach is genuinely recurring rather than a one-off cost. The measure of loss in a misrepresentation claim is different again, being assessed on a reliance rather than an expectation basis, which is one reason buyers sometimes prefer that framing where the facts permit.

Buyers must also show that the loss claimed was caused by the breach and was not too remote, applying the ordinary principles of causation and remoteness. Sellers frequently challenge claims on exactly this basis, arguing the loss flows from a separate cause such as a market downturn or a decision taken by the buyer after completion. Buyers are also under a duty to mitigate, and a failure to take reasonable steps to minimise the impact of the breach can reduce the damages recoverable even where the breach is clearly established.

Agreements often contain specific provisions on how loss is calculated for particular claims, for example pound for pound recovery for tax claims rather than diminution in value, or exclusions for indirect or consequential losses, loss of profit or loss of goodwill. Those exclusions can materially reduce the recoverable amount and often become a key battleground. Because quantifying loss frequently requires forensic accounting input as well as legal advice, we would always recommend advice on quantum at an early stage rather than assuming the figure that feels intuitively fair will reflect what a court would award.

The Tax Covenant and Why It Often Matters More Than the Tax Warranties

Because tax is such a common source of post-completion claims, most share purchase agreements deal with it separately, through a tax covenant or tax deed under which the seller promises to pay an amount equal to certain pre-completion tax liabilities not provided for in the accounts. The covenant sits alongside the tax warranties, and the two are easily conflated, but they operate differently.

Where available, the covenant is usually the better route. Recovery is typically pound for pound, so the buyer does not have to establish a diminution in share value in the way a warranty damages claim requires, and the covenant almost always carries a longer notification period, commonly four to seven years rather than the twelve to twenty four months applying to general warranties. It will also have its own claim machinery, including a procedure for the conduct of HMRC enquiries. Where a tax issue emerges after completion, checking the covenant before assuming the general warranty deadline has closed the door is an important early step, and one that is often missed.

Where Recovery Comes From: Retentions, Escrow, Deferred Consideration and Multiple Sellers

Many agreements provide for part of the purchase price to be held back after completion, either in escrow with an independent agent or simply retained by the buyer, to satisfy warranty claims arising during the claims period. This is a more straightforward route to recovery than pursuing a seller directly, though escrow agreements often contain their own procedures and timelines for release which need reading alongside the sale agreement. Disputes frequently arise over whether a claim was validly notified in time to justify continuing to hold the retention, so the notification and time limit issues discussed above remain just as important.

Retentions and escrow are not the only funds in play. Deferred consideration instalments and earn-out payments are frequently the buyer’s most attractive source of recovery, because they allow an attempted set-off against money not yet paid rather than a claim that has to be pursued and enforced, and a buyer notifying a claim shortly before a payment falls due is often doing so with exactly that in mind. For sellers this compresses the timetable considerably, because the question of whether an instalment must still be paid can arise within weeks. Whether set-off is permitted at all depends on the agreement.

Where there is no retention, escrow, deferred consideration or insurance route, a buyer must pursue the sellers directly, and questions of solvency, the location of assets and the practicalities of enforcement move to the front of the analysis. Establishing a breach is only worthwhile if there is a realistic route to payment at the end of it, which is why we advise buyers to think about where recovery would actually come from at the outset.

Where a business has been sold by more than one seller, the agreement will specify whether liability is joint and several, so the buyer can pursue any one seller for the full amount, or several only, so each is liable for their proportionate share. Several liability capped by reference to each seller’s share of the consideration is common, and institutional or minority sellers sometimes give narrower warranties or none at all. Where liability is joint and several, co‑sellers often enter into separate contribution arrangements between themselves, distinct from the buyer’s rights under the agreement. This matters where one seller is easier to pursue than others, for example because they remain UK based and solvent while a co-seller has moved abroad. Sellers willing to accept only several liability should ensure that is reflected clearly in the drafting, since the default position can otherwise expose an individual to a claim for the whole of a loss caused only in part by matters within their control.

Warranty and Indemnity Insurance: An Alternative Route to Recovery

An increasing number of sales, particularly at the higher value end of the market but now also in smaller transactions, involve warranty and indemnity insurance. This is a policy taken out by the buyer, or sometimes the seller, responding to certain warranty and tax covenant claims and effectively substituting an insurer for the seller as the party ultimately meeting a valid claim.

Where W&I insurance is in place, a buyer identifying a potential breach will usually need to notify the insurer rather than, or as well as, the seller, and the policy’s notification requirements and time limits are separate from, and often stricter than, those in the sale agreement. Insurers investigate closely, looking at whether the matter was known to the buyer’s deal team before completion, whether it falls within an exclusion, and whether it was notified correctly and in time. The policy will also have its own retention, which may not align with the thresholds in the agreement.

For sellers, W&I insurance allows a clean exit with limited ongoing exposure, which is particularly valuable for retiring owners or private equity sponsors returning proceeds to investors. For buyers, it provides comfort where the seller’s ability to pay is uncertain. If a policy is in place on your transaction, its terms need to be understood as thoroughly as the sale agreement, since the practical route to recovery is often dictated more by the policy wording than by the underlying claim.

What to Do If You Suspect a Warranty Claim as a Buyer

If you discover something after completion that suggests a warranty may have been breached, the steps you take early on can make a substantial difference to your prospects of recovery.

The first priority is to identify and calendar the relevant time limits, since these run regardless of how much investigation is still needed and missing them can extinguish an otherwise valid claim. Alongside this, begin gathering the evidence that supports your position, including financial records, correspondence, contracts and any expert input needed to quantify loss, while the facts are fresh and documents readily available.

It is also worth establishing early which routes are open to you, since the same facts may support a breach of warranty claim, a claim under the tax covenant, a claim under a specific indemnity, a claim under a W&I policy, or in some cases a misrepresentation claim, each carrying a different measure of recovery and a different set of deadlines. Quantum deserves attention at the same time, because loss is measured by diminution in value rather than the cost of putting the problem right, and forensic accounting input early often changes the assessment of whether a claim is worth bringing at all.

Resist the temptation to raise the matter informally with the seller before taking advice. Informal discussions can be used against you later, particularly if they suggest you knew about the issue earlier than you now claim, or if they are treated as an attempted notification that does not meet the formal requirements. A solicitor who can review the sale agreement, the disclosure letter and the facts will help you understand whether you have a viable claim, what it might be worth once the caps and thresholds are applied, and how best to notify the seller.

What to Do If You Receive a Warranty Claim as a Seller

Receiving a letter alleging breach of warranty can be unsettling, particularly for individual sellers who feel they have already moved on, but a calm and structured response gives you the best chance of resolving the matter efficiently and on favourable terms.

The first step is to check whether the claim has been notified correctly and in time, since a claim failing those requirements may be capable of being defeated on procedural grounds alone, without engaging with the underlying facts. Even where the notice appears to comply, review it against the precise wording of the notification clause, including the required level of detail, the permitted method of service and the address for notice, since buyers do not always get this right.

Alongside that review, there are a handful of immediate practical priorities.

• Preserve everything. Retain the transaction bundle, the disclosure letter and its annexures, the data room index, board minutes and correspondence with your former advisers. Reconstructing the disclosure record months later is far more expensive and less reliable.
• Establish who is actually on the hook. Where there were several sellers, liability may be several rather than joint and capped by reference to each seller’s share of the consideration. Any contribution arrangement between the warrantors should be identified at the same time.
• Identify any money still in play. Retentions, escrow funds, deferred consideration and earn-out instalments invite an attempted set-off rather than a claim, so if a payment date is approaching your timetable for taking advice is much shorter than the contractual claim period suggests.
• Check insurance and onward recovery. Warranty and indemnity cover, run-off professional indemnity cover or the company’s own policies may respond, and notification deadlines are often tight. Any claim onwards against a professional adviser is better assessed now than as an afterthought.

Assuming the notice is valid, or you cannot be sure it is not, the next step is to gather your own copy of the disclosure letter and bundle and consider whether the matter complained of was in fact disclosed. Sellers are often surprised to find that an issue they assumed was undisclosed was referred to, sometimes in general terms within a data room document, and this can significantly strengthen a defence once properly identified and presented.

A few assumptions come up repeatedly among sellers and each can prove expensive. That the buyer had full access to the data room and so cannot complain depends entirely on how the agreement defines disclosure. That more than a year has passed and so the seller must be safe overlooks the longer tax covenant period and the fact that allegations of fraud sit outside the contractual protections. That the company should deal with the matter rather than the seller personally misunderstands who gave the warranties, and ignores that the company’s cooperation is now within the buyer’s control.

Do not ignore a claim or assume it will go away, since failing to respond within any timescales specified can weaken your negotiating position later. Early advice allows you to respond appropriately, protect your position on any caps, thresholds or disclosure defences, and, where the claim has merit, negotiate a proportionate settlement rather than facing the cost and uncertainty of contested proceedings.

Practical Steps to Reduce the Risk of Warranty Disputes

While warranty disputes cannot always be avoided, both sides can take sensible steps during the transaction to reduce the likelihood of one and improve their position if it arises.

• Thorough due diligence by the buyer remains the single most effective way of reducing risk, since issues identified before completion can be dealt with through price adjustment, specific indemnities or targeted warranties rather than left to surface afterwards. Rushing it to save cost frequently proves a false economy.
• Careful and specific disclosure by the seller, prepared with proper legal input rather than treated as an administrative formality, gives real protection against later claims. A disclosure letter cross referenced clearly to the relevant warranties is one of the most valuable documents a seller’s solicitor can produce.
• Clear and specific warranty drafting, tailored to the business actually being sold rather than lifted from a template, reduces the scope for later argument about what a warranty was intended to cover. Generic warranties that do not reflect the specific risks of the business are a common source of dispute because their scope is unclear.
• Good record keeping after completion, including retaining the sale agreement, disclosure letter, bundle and related correspondence in an organised form, means that if a dispute arises both parties can move quickly rather than losing time searching for documents while deadlines run.

Approaching a transaction with these steps in mind, with experienced solicitors involved from an early stage rather than brought in once a problem has emerged, remains the most effective way of managing the risk of a dispute on either side of a deal.

How the Jonathan Lea Network Can Help

Our corporate and commercial dispute resolution team advises both buyers and sellers on warranty claims arising from the sale and purchase of businesses. We can help you assess the merits of a claim, calculate and protect the relevant contractual deadlines, review disclosure letters and sale agreements to establish your realistic prospects, and negotiate a proportionate resolution wherever possible, while remaining ready to pursue or defend litigation where a fair settlement cannot be reached.

We work closely with our corporate team, who regularly draft and negotiate sale agreements and disclosure letters, so we bring a practical understanding of how these documents are put together and where disputes commonly arise. If you are concerned about a possible warranty issue, whether you have just discovered a problem as a buyer or received a claim as a seller, getting advice early, before key deadlines pass and positions become entrenched, will put you in the strongest position to resolve the matter well.

Contact Us

We will respond to most enquiries with both an indicative scope of work and fee estimate, as well as the offer of a complimentary 20-minute discovery video call to discuss your issues and how we can help, before sending a more considered formal fee estimate via email.

In some limited cases, if you would just like initial advice and guidance on a call, we may instead offer a fixed fee appointment (commonly charged between £280 to £500 + VAT) whereby we will review the information you provide, hold a video call consultation and then follow up with an advisory email (as well as a fee estimate for any further work identified).

Please email wewillhelp@jonathanlea.net or call us on 01444 708640 as a first step. We first need an overview of the background and your issues, together with any significant documents, to provide an indicative scope of work and fee estimate.

 

 

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited. 

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