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Therefore, if a quality specified in the report is not existent, the seller
shall be responsible of the declared quality (as explained above).
However, if the seller did not provide the buyer with certain facts
and necessary documents, which could have identified the defects of the
examined enterprise by grave fault and fraudulent actions, or has not pro-
vided such information in its vendor’s due diligence report, its responsi-
bility shall not be limited even if a due diligence has been conducted.
Furthermore, the sellers’ responsibilities from hidden defects, which
may not be detected through examination, shall endure (CO art. 200).
Due Diligence Conducted Prior to the Execution of the
Agreement or Prior to the Transfer of the Rights
Such a due diligence shall not have an impact on the responsibili-
ty of the buyer on warranty against defects. This due diligence shall
constitute the examination that the buyer is legally obliged to conduct
after the purchase in order to hold the seller liable from the defects.
Effects of Representations and Warranties on Liability
Pursuant to CO article 187, one of the conditions for the seller to
be responsible from defects of a sale is that the defect shall be a hid-
den defect. As mentioned above, any deficiencies, which are or may be
detected as a due diligence conducted prior to the purchase, shall no
longer constitute hidden defects. The seller shall not be held responsi-
ble from (unhidden) defects, which may be detected by the buyer
through a due diligence conducted on the sold good with due attention.
The responsibility of the seller shall only endure if the seller has fraud-
ulently hidden certain facts and information or in case of a hidden
defect.
Therefore, the parties of a share purchase agreement prefer to draft
the representations and warranties of the seller in detail. This is done
especially given the difficulty of determining which defect shall con-
tinue to be a hidden defect after conducting a legal due diligence.
Pursuant to CO article 197, the seller shall not be responsible of such
hidden defects. Likewise, the representations and warranties have an
important role in determining the mentioned and promised qualities.
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NEWSLETTER 2012