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The seller warrants under the representations and warranties of the
share purchase agreement that the purchased enterprise actually pos-
sesses the qualities claimed to be possessed by the enterprise. These
provisions determine the qualities of the enterprise and therefore the
responsibility of the seller; given that any discrepancies between the
declared qualities and the qualities present in the enterprise shall con-
stitute a defect. The buyer is requested to assume certain risks by its
representations and warranties; frequently the representations and war-
ranties include a provision that all information and documents provid-
ed by the seller during the due diligence are accurate and complete and
the seller did not refrain from the provision of any information or doc-
ument.
Conclusion
The seller is obliged to ensure that the good, whose property is
transferred to a buyer under a sale and purchase agreement, does not
possess any defects. If the buyer detects that the sold good has defects
as a result of conducting an examination thereon and notifies such
defect, it may hold the seller responsible from its warranty against
defects. In such a case, the buyer may either request a discount in the
purchase price, or the termination of the agreement or the replacement
of fungible goods. If the buyer purchases the good after conducting an
examination, it will be assumed to have accepted the (evident) defects,
which may be detected as a result of the examination; and consequent-
ly the buyer shall not be held responsible of such defects.
The mergers and acquisitions include the execution of a sale and
purchase agreement. The buyer shall examine the sold company or
enterprise through conducting a due diligence thereon. Therefore, such
a due diligence shall result in the seller not being responsible of defects
that are not hidden defects. On the other hand, if the seller knowingly
and fraudulently hid certain facts as a result of which certain defects
are not identified, the responsibility of the seller with respect to war-
ranty against defects shall continue.
The seller may explicitly warrant that certain evident defects
detected through the due diligence are no longer existent. The sellers
provide an explicit promise that the purchased company or enterprise
LAW OF OBLIGATIONS
305