Insights

Andrew Robins

Published 31 October 2021
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Warranty Claims Notification Clauses and Notices of Claim

Warranty claims notification clauses are a standard feature of a share purchase agreement (SPA). They require that written notice of a warranty claim must be given within a specified deadline, and they also normally require that any claim must be commenced within a specified time from the date of any notice of claim. Their purpose is to inform the recipient at the earliest possible date that a claim is being made whilst also providing sufficient detail about the nature of the claim.

Bringing a claim

In order to bring a subsequent claim, you will need to have complied with the warranty claims notification clause. It perhaps should go without saying that it is a long-standing principle that, where a contract requires a notice to contain prescribed information, it must do so. Unfortunately, however, this is an area that routinely throws up difficulties in respect of what information is required in the notice of claim, leaving claimants at risk of having the subsequent claim struck out or resulting in summary judgement for not complying with the requirements.

Understanding the requirements of the warranty claims notification clause

In determining what the requirements are in any particular case, the starting point is that every notification clause turns on its own individual wording (The Court of Appeal in Nobahar-Cookson v The Hut Group Ltd [2016] EWCA Civ 128).

Recent court guidance

There have been a number of recent decisions that have provided further guidance. In the recent case of TP ICAP Ltd v NEX Group Ltd [2021] EWHC 1375 the High Court had struck out parts of a buyer’s warranty claim because the notice of claim did not contain sufficient details of the claim.

The test applied by the Court in TP ICAP was how a notice would be understood by a reasonable recipient taking into account the relevant objective, commercial context. The Judge considered that the notification provision set a low threshold for the level of detail required to be given of the claim but held that the buyer’s notices were still defective. The Court found that the warranty claim must:

  • describe the broad nature of the contravention of law or regulation, including by identifying the relevant law or regulation,
  • make it clear that, as a result, the buyer was claiming for breach of warranty. It was not enough to state that as a result of particular circumstances a claim might be made in the future, and
  • describe how any fine, penalty or other liability had had or would have a materially adverse impact on the target’s business operations. This part could not simply be left to the seller to infer.

This approach was applied in the subsequent case of Dodika Ltd & Ors v United Luck Group Holdings Ltd [2021] EWCA Civ 63. In this case, the claimant successfully appealed against the decision to grant the defendants/respondents summary judgment on the basis that the notice of claim was non-compliant. The Court held in applying the TP ICAP test (whilst also taking into account the specific circumstances of the case) that the requirement for ”reasonable detail” did not require the claimant to set out all matters already known to the seller.

Finally, in the recent case of Transport for Greater Manchester v Kier Construction Ltd (T/a Kier Construction – Northern) [2021] EWHC 804 (TCC), the court held that a notice of claim had complied with the contract requirements and found a notice should simply be “clear and unambiguous“.

Takeaway

Great care is required both in the drafting of the warranty claims notification clause itself and of any subsequent claims notice. This should not be left to the last minute and lawyers will sometimes have to walk a fine line, ensuring that they have met the exact provisions of a notification clause by being specific enough in the details of the claim but not so specific as to limit the potential of their claim.

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