INDEMNITIES are often used in share or asset purchase agreements to address specific risks, where it is appropriate that the risk identified should be borne by the seller. However, a very recent Court of Appeal case reminds us that interpretation involves broad principles rather than strict rules.
In this case the seller agreed to indemnify the buyer against losses arising out of “claims or complaints registered with the FSA pertaining to any misselling or suspected misselling…”
The buyer suffered losses because the target company self-reported potential misselling to the FSA, and made a claim against the seller under the indemnity.
The court found that there was no valid claim because the losses resulted from self-reporting rather than as a consequence of a customer claim or complaint. The court emphasised that it is not for the courts to improve a bad bargain by a process of interpretation.
For further information please contact Simon Arthur, partner and commercial law specialist at Lamb Brooks LLP on 01256 305586 or email him at simon.arthur@lambbrooks.com.
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