Commercial Contracts: Breach of Warranty

Commercial Contracts: Breach of Warranty

Claims under a contractual warranty must fully comply with procedures set out in commercial contracts – including where a limitation period is imposed on warranty claims. The expert commercial litigation team at Bahamas law firm ParrisWhittaker is highly experienced in advising and representing businesses on their commercial contracts, contractual warranties, and the extent of their obligations to each other.

The UK courts have recently upheld restrictions on warranty claims relatively strictly against purchasers. In a recent case, the purchasers under a commercial contract were time barred from making a claim when a dispute arose.

What’s The Background?

Under the terms of a share sale and purchase agreement, a company (Aegis)
specified that the purchaser (Ipsos) must, as soon as practicable, notify Aegis in writing specifying in reasonable detail “the matter which may or will give rise to the relevant Claim and that there will or may be a relevant Claim as a result of the Third Party Claim" within two years after completion1. Furthermore, the terms imposed a time limit of two years for giving notice of such claims; and a further time limit of six months for bringing proceedings.

Ipsos gave notice of various third-party claims that may give rise to warranty claims but stated that this was not a Claim Letter for the purposes of the time bar. It then sent a more detailed letter just before the two year period was up giving notification of an additional claim. Six months later, proceedings were started.

What Was the Issue?

The court had to consider whether, as Aegis argued, the claims were time-barred because no Claim Letter had been served within the two-year period specific in the contract.

The court decided that the contractual clause required a Claim Notice. In addition, a reasonable recipient of the letter from Ipsos -- with knowledge of the previous correspondence and the business context in which it was written -- would not have understood it to be a Claim Notice. The letter, for instance, did not include information including the nature of the claim, as required under the contract terms.

Ipsos’s claims were, therefore, time-barred.

What Does This Mean?

Where a dispute arises under a contract, it is vital to ensure a letter of claim is sent in good time, setting out clearly and in reasonably sufficient detail, the nature of the claim.  Existing contracts should be checked as to whether or not there are time limits imposed on bringing a claim. Strict compliance is necessary; otherwise, the claim may be time barred.

How Can We Help?

The commercial litigation lawyers at Bahamas law firm ParrisWhittaker have years of experience advising commercial organisations on their commercial contracts and need to notify the other party of a potential claim in good time. Contact us straightaway for urgent, strategic advice.

1Ipsos S.A. v Dentsu Aegis Network Limited [2015] EWHC 1171 (Comm)