Imputable shortcoming when acquiring a company?

Imputable shortcoming when acquiring a company?

In this case, the acquiror of a company claims the seller is liable for not mentioning issues with a running maintenance contract. The Court of Rotterdam deems the seller should have mentioned the issues. The court of appeal did not agree. Contract lawyer Marco Guit explains the decision of the court of appeal.

 

 

Acquiror of the company feels misled

After concluding the take-over agreement, the company purchased seems to have issues concerning and existing maintenance and guarantee contract with a third party. Solving these problems will cost the acquiror a lot of money. The acquiror also states that he would not have acquired the company, or at least, not under the same terms, if he had known that this loss-making contract was part of the take-over agreement. He claims the seller is liable for not mentioning the problems.

Court: violation of disclosure obligation

The court agreed with the acquiror. The selling party is liable pursuant to tortuous act, because he knew that the obligations arising from the maintenance and guarantee contract could possibly lead to losses and/or a damage claim from the third party. The selling party namely has a disclosure obligation for such information.

Parties’ intention prevails over contract’s verbatim text

The court of appeal does not agree with the court. The court of appeal interprets the acquisition agreement based on the Haviltex criteria. Based on the latter, the court of appeal concludes that the issues between the company purchased and the party with whom it has a maintenance contract, do not fall under the disclosure obligations of the selling party. The selling party cannot be expected to have known that a solution could not be found for the existing problems. Also, the selling party had created a financial reserve for these problems.

AMS Lawyers provide legal advice for company acquisition

What obligations do parties have when a company is acquired? Based on this judgement, the disclosure requirement does not imply that all issues (which could lead to financial damages) need to be mentioned. In case of an acquisition, it is important to know which underlying contracts are being taken over due to the purchase. AMS Lawyers can guide you during the purchase or sale of a company.

Marco Guit - Advocatenkantoor AMS Advocaten
Marco Guit Marco is generally described by his clients as motivated and solution-oriented. He advises – and, if necessary, litigates – mainly in the areas of corporate law, contract law, insolvency law, property law and construction law. Also follow Marco on Google or LinkedIn. Marco is available via e-mail and +31 (0)20-3080315.
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