Residencial Mac-Kay Las Condes

Sandbagging Share Purchase Agreement

Sandbagging Share Purchase Agreement

06/10/2021 • Under: Sin categoría


The context of the English case of Infiniteland Ltd and Another v Artisan Contracting Limited and another[2] was that Infiniteland acquired the shares of three companies of Artisan Contracting. Infiniteland filed a lawsuit against Artisan Contracting for breach of warranty under the SPA when one of the companies it purchased went bankrupt. An anti-sandbagging clause leads to an investigation into what the buyer knew about the subject matter of the infringement and the date on which this information was identified, which virtually guarantees a lengthy investigation process in the event of a dispute. While buyers should object to all anti-sandbagging clauses, the buyer, if compelled to accept one, is well advised to limit the knowledge standard to «actual» knowledge (as opposed to constructive, implicit or presumed knowledge) and to ensure that proof of knowledge of such an infringement rests with the seller. In the case of a claim, the inclusion of an anti-sand provision requires the buyer to (i) demonstrate the existence of an infringement; and (ii) refute any allegation by seller that it (buyer) was aware of the infringement prior to conclusion before it could consider a right to compensation. Since it can be difficult to prove that someone knew something or not, the definition of «knowledge» typically becomes a key point in negotiating an anti-sandbagging clause. Buyers and sellers should try to define «knowledge» in such a way that it is clear how to prove any right to knowledge, that is, by identifying a source, scope and standard of proof. In addition to the above, it should be noted that under Quebec law, which is more of a civil law jurisdiction than a common law jurisdiction, there is a bona foit requirement that generally applies to the exercise of contractual and non-contractual rights. In this context, «good faith» requires, inter alia, that these rights be exercised in good faith and not in an abusive manner.

While this aspect of Quebec law has not been tested directly in a sandbag situation, it is likely that in the absence of a pro-sandbagging provision in the corresponding contract, the doctrine of good faith/abuse of rights would pose a major problem for the application if actual knowledge was available before conclusion. . . .

Presiona nuevamente en el botón de Whatsapp para hacer tus preguntas.