September 27, 2016

The claimant, Idemitsu, and the defendant, Sumitomo, entered into a sale and purchase agreement for the sale of a subsidiary of Sumitomo to Idemitsu.  By clause 6.1 of the SPA, Sumitomo warranted in terms set out in Schedule 4 as to past and present facts about the subsidiary.  Schedule 6 to the SPA precluded claims not notified to Sumitomo within 18 months of completion.  Idemitsu discovered what it considered to be breaches of the warranties but, on the basis it was too late to bring the claim for breach of warranty, sued for damages for misrepresentation under s 2(1) of the Misrepresentation Act 1967.

On Sumitomo’s application for summary judgment the court dismissed Idemitsu’s claim.  As to the main issue of whether warranties can be representations, the court was clear that when a seller, by the terms of the contract under which he sells, “warrants” something about the subject matter sold, he is making a contractual promise; he is not purporting to provide information and is not making a statement to his buyer.  The act of concluding a contract is constituted by, and amounts to, a communication only of assent to, and intention to be bound by, the terms agreed.  The underlying premise of Mann J’s reasoning in Sycamore Bidco Ltd v Breslin [2012] EWHC 3443 (Ch), with which the court agreed, was that the act of concluding a contract on terms that include contractual warranties does not amount to or involve the making by the warrantor to the counterparty of any relevant statement.  The court also refused to accept that by providing an execution copy of the agreement for signature the defendant made representations in terms of the warranties contained in it (Idemitsu Kosan Co Ltd v Sumitomo Corp [2016] EWHC 1909 (Comm) (27 July 2016) – to read the judgment in full, click here).