In Drax Smart Generation Holdco Ltd v Scottish Power Retail Holdings Ltd [2024] EWCA Civ 477, the Court of Appeal held that the High Court had erred in finding that a buyer’s notice of a warranty claim under a share purchase agreement was insufficient because it had failed to state in reasonable detail the amount claimed and the buyer’s calculation of the alleged loss.

The contract required notice before a specified date providing in reasonable detail the nature and amount of the claim to which the High Court had considered the buyer’s notice to be insufficient as it had failed to notify any claim for loss based on the decrease in value of the acquired shares choosing instead to base it on the loss sustained by the acquired company.

The Court of Appeal disagreed finding that there was nothing in the clause obliging damages to be based on the difference in value of the acquired shares and that imposing such a requirement served no purpose other than to introduce an obstacle to defeat what would otherwise be a potentially valid claim.

In the High Court’s view, the buyer’s notice undeniably stated the amount claimed and provided details of how it had been calculated and that nothing further was required. Further, that calculation was not set in stone and if later the calculation was determined to be in error, or capable of refinement, there was no good reason to insist that the buyer should be held to the way in which the calculation was originally formulated.

The takeaway from this is that all clauses, not just those limited to warranty claims in share purchases, should be drafted concisely as any ambiguity will not favour the party choosing to rely on it.  In this case, the ambiguity surrounding how losses should be calculated ultimately meant that the notice requirement was satisfied and that the buyer was not time barred from making their claim.

If you need advice on warranty claims or breach of contract in general, please contact me at s.li@teacherstern.com or +44 (0) 20 7611 2362.