Must a notice of breach of warranty under an SPA quantify each claim separately?
Share purchase agreements frequently require the seller to notify the buyer not merely of the nature of a claim but also the amount claimed.
The question arises of whether such a notice must set out an amount claimed for each individual breach separately, or whether the notice may simply set out the total amount claimed in respect of all alleged breaches.
In a new decision, Decision Inc Holdings v Garbett [2023] EWCA Civ 1284, the Court of Appeal held that – on the particular facts and wording of the provision in question – the notice was required to set out the amount claimed for each separate breach.
In Decision Inc, the SPA provided that the sellers would not be liable for a “Claim” unless given notice in writing “summarising the nature of the Claim (in so far as it is known to the Buyer) and, as far as is reasonably practicable, the amount claimed“.
On the facts, the Court of Appeal (overturning the trial judge) held that it would have been reasonably practicable to specify the amount claimed in respect of each breach, rather than simply an omnibus amount. As this had not happened, the claim was dismissed.
As the Court emphasised in Decision Inc, each case must turn on the particular wording of the relevant provision in its particular context.
The wording used in the SPA in that case is, however, commonly used in SPAs. In most matters, it is also likely to be reasonably practicable to set out the amount claimed in respect of each particular breach.
Despite this, such particularisation is frequently not provided in the notice or indeed in the Particulars of Claim. No doubt this is often at least in part because it is more time-consuming (and hence expensive) to quantify individual claims.
In light of Decision Inc:
- Those providing notice under SPAs which contain such a notice requirement will need to quantify each claim where reasonably practicable. Not least where the quantum of total claim is different where several breaches are established (e.g. due to overlap), it would also be prudent to specify the total claim too.
- Those currently about to litigate (or in the midst of litigating) SPA claims where the agreement contains such a provision would be well-advised to check the notices already given to see if: (a) (when claiming) there needs to be further notification; or (b) (when defending), an additional defence may be available on the basis of a failure duly to specify the amount claimed.
