A corporate financier might say that only a fool or a liar would find themselves on the receiving end of a breach of warranty claim after the sale of a business. Arguably, a well-organised, properly advised vendor should be able to sell a business and be reasonably certain that a claim from the purchaser will not follow. But forensic accountants see plenty of cases where a breach of warranty is alleged and a claim is made.
Some of these claims arise from deals completed in a hurry, or where the commercial desire to seal a deal has overridden the need to properly secure both parties’ positions through the transaction documentation. Claims for breach of warranty can also be initiated by more cynical purchasers as a matter of policy in all the acquisitions they carry out; or they may also be used as a means to avoid or delay tranches of deferred consideration.
