Expert Opinion: Your rights in Business Sale and Purchase Agreement claims

Anna Barnes (pictured), Partner in the Dispute Resolution team at Cheshire law firm, SAS Daniels, outlines the potential rights and remedies in relation to Business Sale and Purchase disputes and claims.

Business owners and directors are busier now more than ever due to the time-consuming effects that Covid-19 has had on the economy and the way businesses operate. However, this stress may be heightened if you are a new business owner and the business is not what it appeared to be or if you have sold a business and the purchaser has intimated a claim against you or is withholding payment of deferred consideration.

Business Sale and Purchase Agreement Claims

It is important to take legal advice at the earliest opportunity if you believe that your new business is not what you thought it would be or if you have sold a business and the purchaser has intimated a claim against you or is withholding payment of deferred consideration. The starting point is to review the precise terms of the Business Sale/Purchase Agreement.

The potential claims that could be made are likely to include:

• A claim for breach of warranty;
• A claim on the indemnities;
• A claim pursuant to Misrepresentation Act 1967;
• A claim for fraud/fraudulent misrepresentation;
• Possibly a claim in frustration (i.e. that the Business Sale/Purchase Agreement be set aside on the basis that an unforeseen event has rendered the contractual obligations impossible, or has radically changed the principal purpose of the contract).

Considerations When Making a Claim

If you think that you may be entitled to bring one or more of the five potential claims above or if one of or more of these claims has been intimated against you , it is advisable to contact a solicitor to discuss your options as soon as possible. You should also be aware of the following:

1. The time limits and other requirements contained within notification clauses in Business Sale and Purchase Agreements are enforceable (although they would not usually apply in cases of fraud);
2. The wording of the warranties will be considered individually and on a case by case basis (warranties are not standard across Business Sale and Purchase Agreements);
3. Whether or not a claim pursuant to the Misrepresentation Act 1967 can be brought will depend on the precise wording of the Business Sale and Purchase Agreement (in particular any entire agreement clause, any non-reliance clause and any exclusion clauses). If a claim pursuant to the Misrepresentation Act in 1967 is not possible, fraud will need to be considered. A claim in fraud is complex and early advice should be taken before any allegations of fraud are made.
4. The options that are available to you in terms of pursuing a late payment of deferred consideration will depend on the particular circumstances and the wording of the Business Sale and Purchase Agreement.