US/UK M&A: Warranties

In this article we examine the different approaches to giving warranties in US and UK share purchase agreements (SPA) including the terms and scope of the warranties, who gives them, the basis of recovery under the warranties, the basis of the sellers' liability and other protections available to buyers.

What are warranties?

Warranties are a common feature of share purchase agreements on both sides of the Atlantic. The warranties are statements of fact in respect of the target company or business which, if untrue, will give the buyer the right to claim for loss. However, the risk allocation under the warranties differs; a US style SPA tends to favour the buyer, whereas a UK style SPA tends to favour the seller.