Article: Measure of Loss for Breach of Warranty in Sale of Shares

If A buys shares from B, and B made certain warranties to A about the company which turned out to be false, A can sue B for breach of warranty. Separately, if B had made misrepresentations to A to induce A to purchase the shares, A can sue B for misrepresentation in addition to breach of contract.

This may occur for example where it was falsely warranted that the company’s profits were higher than they in fact were, or that certain machinery or property of the company was in good working condition and free of defects.

How is the loss measured in such a scenario?

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Case Update: Cavendish Square Holding BV v Talal El Makdessi (Cavendish) and ParkingEye Limited v Beavis UKSC – penalty clauses

Cavendish Square Holding BV v Talal El Makdessi (Cavendish) and ParkingEye Limited v Beavis [2015] UKSC 67

Significance: the true test for whether a clause is unenforceable as a penalty clause is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.

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