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Share sale disputes: – can warranties and disclosures give rise to misrepresentation claims?

23.04.26

Hoffman v Finalto Group Ltd [2026] EWHC 921 (Comm), out on Tuesday, presents a smorgasbord of issues frequently encountered by those operating in the corporate field, including as to the enforceability of heads of terms relating to equity participation and the approach to assessment (including date) of loss for failure to grant equity.

It also again revisits the important but thorny topic of when warranties given in the context of a share purchase agreement can be treated as also amounting to representations so as to found claims, usually in deceit (due to exclusion of negligent misrepresentation clauses).

Here the warranties were given in a Management Warranty Deed which was subject to a Disclosure Letter.  These documents were entered into alongside the SPA and other related contractual documents.  Pursuant to an agreed signing protocol, the Management Warranty Deed and Disclosure Letter were signed before the SPA.

Having cited the key first instance authorities which have considered whether SPA warranties can amount to representations,  the Commercial Court accepted the summary in Fraud and Breach of Warranty (2^nd ed) (Ed. Salzedo, McIntyre, Shaw):

“The better analysis is that a warranty does not, without more, imply any representation, because a vendor might quite properly agree to compensate the purchaser if losses exceed a given figure without representing that they will not do so. As explained most clearly by Andrew Baker QC in Idemitsu, parties may agree that a matter (for example an accounting quantity) is warranted so that the vendor will compensate the purchaser for any difference between the true figure and the warranty, without the vendor necessarily representing that it is true. A warranty itself cannot be a representation, because it is not pre-contractual, but given at the moment of contracting. A promise to enter into a warranty is also not a representation because it is a mere promise. The real issue that arises in these cases is whether there is any other context, statement or conduct that transforms the promise to enter into a warranty into a representation that the subject matter of the warranty is true. That may be the position, but equally it may not, and it certainly does not follow from the mere willingness of the vendor to give the warranty. If this is the correct analysis, then the consequence is that even a fraud claim cannot be based on a promise to enter into a warranty, nor on a warranty once given, without some further fact to turn that promise into a representation.’”

The Court then found that statements in the Management Warranty Deed did take effect as representations as well as warranties because:

• The nature of many of the statements was such as to be consistent with providing information about the past or present, on matters which would be unlikely to be within the knowledge of the buyer.
• The statements were contained in drafts of these documents which were seen before the entry into of the final deal documentation, including the SPA. Further, as a matter of sequence, as set out in the ‘signing protocol’, the execution of the SPA followed the execution of the MWD and the Disclosure Letter.
• The MWD and Disclosure Letter contain provisions which indicate that it was understood that statements within them could constitute representations. Thus Clause 17.2 of the MWD is a provision confirming that each party has not entered into the MWD or other Transaction Documents on the basis of any representation, warranty, undertaking or other statement ‘which is not expressly incorporated into this Deed or into any other Transaction Document’. That clause assumes that there may be representations or statements incorporated into the MWD. Further, Clause 17.3 excludes liability for misrepresentation ‘whether negligent or innocent and whether made prior to and/or in this Deed’. That provision does not seek to exclude liability for fraudulent misrepresentation, a point confirmed by Clause 17.6, but does assume that there may be misrepresentations ‘prior to and/or in this Deed’.
• In the Disclosure Letter it is stated that ‘the Management Warrantors make no representation or warranty in relation to any disclosed matter or document which is not expressly given in the Warranty Deed’. That envisages the possibility that there may be representations given in the MWD.

On the facts, the deceit claim failed: the relevant representations were not shown to be false, were not shown to have been disbelieved by the claimants, and did not affect whether GI would have bought.

More importantly for future cases and for those drafting SPAs, however, is the fact that most of the above factors which led to the Court finding that representations had been made are found in many SPAs.

Indeed, aside perhaps from the fact that the MWD were in a separate document signed in advance of the SPA, the stated features appear in most SPAs which cross my desk.

This case may therefore give fresh encouragement to misrepresentation claims based on matters set out in warranties and disclosure letters, particularly where drafts were circulated pre-signing and the transactional documents and non-reliance clauses are framed in this way.

David Lascelles is a leading junior in share sale disputes, with substantial experience in breach of warranty, deceit and other contentious M&A claims, and is ranked Tier 1 in Company.

Littleton is hosting a breakfast seminar for solicitors on 11 June 2026 on share disputes. If interested in attending, please contact Olivia de Satgé (Head of Marketing): – odesatge@littletonchambers.co.uk