{"id":30321,"date":"2023-06-29T08:47:41","date_gmt":"2023-06-29T08:47:41","guid":{"rendered":"https:\/\/thelegalcompany.nl\/?p=30321"},"modified":"2026-09-02T16:41:30","modified_gmt":"2026-09-02T16:41:30","slug":"warranties-in-a-sale-and-purchase-agreement-a-guarantee-of-success","status":"publish","type":"post","link":"https:\/\/thelegalcompany.nl\/en\/warranties-in-a-sale-and-purchase-agreement-a-guarantee-of-success\/","title":{"rendered":"Warranties in a sale and purchase agreement \u2014 a “guarantee” of success?"},"content":{"rendered":"
Introduction<\/strong><\/h5>\n

A case recently came before the Amsterdam District Court in which the seller of the shares (hereinafter \u201cSeller<\/strong>\u201d) of her company IMAKA, and the buyer of those shares (hereinafter: VPG<\/strong>), faced off against each other. The trigger lay in the arrangements made in the share purchase agreement regarding the soundness of the company sold through the share transaction.<\/p>\n

Case<\/strong><\/h5>\n

VPG claimed from the Seller that the damage claimed by the housing association against IMAKA for defective installation work performed by IMAKA should be compensated by the Seller of the shares. According to VPG, the basis for this claim was that the Seller had breached the warranties in the purchase agreement. For instance, article 6.3 of the purchase agreement stated that IMAKA had always, to the best of its knowledge, fulfilled its material obligations under agreements it had entered into.<\/p>\n

However, it was only after the takeover by VPG that the housing association had asked IMAKA to remedy this damage and repair the defect. VPG naturally did not like this, since it would considerably affect IMAKA\u2019s profitability \u2014 a substantial and unexpected cost item.<\/p>\n

The court ruled that this reliance on the warranty did not hold up.
\nFirstly, because it did not concern a formal notice of liability against IMAKA by that housing association. IMAKA had, in the meantime, carried out those repairs and adjustments without being obliged to do so.<\/p>\n

Secondly, the purchase agreement provided that the Seller must give consent if any liability were to be acknowledged. That had also not happened.<\/p>\n

VPG also claimed an amount of \u20ac96,555 for the loss IMAKA had suffered over 2018. VPG took the view that this warranty had been breached because the Seller had led it to believe that the expected profit for 2018 would be between \u20ac50,000 and \u20ac297,000. A reliance on this warranty was also rejected by the court, because in the context of the Due Diligence investigation carried out by VPG prior to the purchase, the Seller had duly provided all relevant financial information. This already showed that IMAKA\u2019s interim figures were already disappointing.<\/p>\n

What lesson can we draw from this?<\/strong><\/h5>\n

The ruling above shows that warranties are important, but that they must also lead to instructions being given to the company itself. Here, after the takeover, the buyer should of course have instructed IMAKA that it should not simply acknowledge submitted damage claims and then bear the cost itself. As the new management, you need to give instructions on that!<\/p>\n

Warranties are not a blanket guarantee against everything that goes wrong after the takeover<\/strong><\/h5>\n

And as a seller, you cannot expect the warranties given to provide a complete indemnity for everything that goes wrong or falls short after the takeover date, certainly not where it was within the Buyer\u2019s own power to limit that damage. The risk of the company purchased simply passes as of the chosen effective date of the shares.<\/p>\n

Duty to investigate and duty to disclose<\/strong><\/h5>\n

In any case, before buying the shares of a B.V. operating a business, it is important as a buyer to investigate what you are buying and whether it matches your expectations. This is done by means of a so-called Due Diligence investigation. You then request contractual warranties on matters about which you have not yet learned enough and which cannot reasonably be investigated. The seller, on the other hand, also has a duty to disclose certain facts, characteristics and risks of that company that it knew or should have known could diminish the value of the company purchased. In the event of a breach of those warranties and that duty of disclosure, the buyer of the shares can recover its damage to the company from the seller, ensuring that, in effect, you have not overpaid for that company. But then you do need to have made very clear agreements about those warranties, and you must also have asked the right questions yourself as part of your own duty to investigate.<\/p>\n

Always make sure, therefore, to consult the corporate lawyers of The Legal Company if you intend to acquire a company. We are happy to assist you in drafting a purchase agreement\/asset transaction deed or preparatory steps such as a Due Diligence investigation or a letter of intent. Contact us directly via info@thelegalcompany.nl or call 020 345 0152.<\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction A case recently came before the Amsterdam District Court in which the seller of the shares (hereinafter \u201cSeller\u201d) of her company IMAKA, and the buyer of those shares (hereinafter: VPG), faced off against each other. The trigger lay in the arrangements made in the share purchase agreement regarding the soundness of the company sold […]<\/p>\n","protected":false},"author":2,"featured_media":23191,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"page_builder":"","iawp_total_views":0,"footnotes":"","_et_pb_custom_css":""},"categories":[29],"tags":[],"class_list":["post-30321","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-contractenrecht"],"acf":[],"_et_pb_custom_css":"","yoast_head":"\nWarranties in a sale and purchase agreement \u2014 a "guarantee" of success? - The Legal Company<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/thelegalcompany.nl\/en\/warranties-in-a-sale-and-purchase-agreement-a-guarantee-of-success\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Warranties in a sale and purchase agreement \u2014 a "guarantee" of success? - The Legal Company\" \/>\n<meta property=\"og:description\" content=\"Introduction A case recently came before the Amsterdam District Court in which the seller of the shares (hereinafter \u201cSeller\u201d) of her company IMAKA, and the buyer of those shares (hereinafter: VPG), faced off against each other. 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