Don't Breach A Warranty Through Failure To Fulfil A Third Party Contract

When entering into a contract, one party may be asked to give warranties to the other party relating to a number of different aspects of the state of the company, including the status of and ability to perform any third party contracts that party may be involved in. The recent decision of the Court of Appeal in the case of Belfairs Management Limited v (1) Matthew Sutherland (2) Christie Jane Sutherland [2013] EWCA Civ 185 should be a warning to parties that they need to be careful when entering into such warranties in order to protect themselves from being found in breach of warranty at a later date.

The Belfairs case involved the sale in February 2008 of 60% of a company Waveform Solutions Limited ('Waveform'), by the husband-and-wife defendants Mr and Mrs Sutherland, to a company called Belfairs Management Limited ('Belfairs') for the sum of £2 million. Waveform, of which Mr and Mrs Sutherland were the only shareholders, was a supplier of communications and information technology, as...