Notwithstanding the general approach that disclosure must be fair to qualify any of the guarantees provided by the seller, buyers and their legal advisers should carefully consider, with respect to the MAN and Infiniteland cases, whether they incorporate into their agreements an explicit notion of «fair disclosure» that a disclosure is effective, must contain such information, allowing a reasonable buyer to make a duly informed assessment of the facts, facts and circumstances that lead to the inconsistency with the warranties and their effects. This practice is becoming more and more common. As has already been said, the position of U.S. states on the issue of buyers` knowledge varies. The first New York case on buyer knowledge is the Ziff-Davis case. The seller provided assurances and guarantees as to the financial situation of the division sold to the buyer. As part of the due diligence on the part of the buyer`s accountants, the buyer learned that the financial situation of the target company was not as presented and justified. Nevertheless, the parties concluded the transaction and the buyer subsequently filed a complaint. The Court finally decided that the buyer had the right to file a complaint for infringement, despite its prior knowledge. The court rejected the argument that the buyer must exercise faith in the truth of the warranties and stated that «the crucial question is not whether the buyer believed in the truth of the promised information,. . .
But if [he] believed that he was buying the promise of the [seller],» as far as the truth of the statement is concerned. However, the Tribunal noted three important points: (i) that the parties had an explicit provision in the agreement that the safeguards would «survive the conclusion, notwithstanding an investigation conducted by or on behalf of the other party»; (ii) the parties did not agree before the conclusion of the infringement; and the parties had agreed that the finding «would not constitute a waiver of rights or defenses» and (iii) that the buyer learned after the signature, but before the conclusion of the infringement. These points were used in subsequent New York cases to limit the effect of the Ziff Davis case. The U.S. Convention provides that the buyer authorizes certain disclosures only with respect to any warranty and insurance against which the disclosure is made. General disclosures are not common and a purchaser under a U.S. agreement generally endeavors to provide in the agreement that certain disclosures regarding all warranties are not treated as effective disclosures unless explicitly referenced to you. Since IBP, Inc. vs. Tyson Foods, Inc. (Del Ch. 15 June 2001), this type of clause is all the more important.
In the acquisition agreement, the undisclosed liability stated that IBP had no undisclosed liabilities, «[e]xcept with respect to potential liabilities disclosed [elsewhere] and all other liabilities (in addition to ibps` profit provision at 3. Quarter 2000) related to certain incorrect accounting practices within DFG Foods, a subsidiary of IBP. Historical differences between British and American practices are increasingly taking place internationally. The vagaries of underlying legal considerations in each jurisdiction are partly responsible for the differences, but habit and practice play an important role in organising the form and content of share purchase agreements in the UK and the US (or, to use the UK nomenclature, contracts for the sale and sale of shares). This commentary focuses on the differences in the following areas: a stock purchase agreement resembles in many ways other M&A or full purchase agreements, but there are a few differences. Here are some of the most important concepts and provisions found in G.S.O. Even courts that prefer this approach make some exceptions to allow evidence of fraudulent misrepresentations. These exceptions may, however, be limited….