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When emails bite: warranties are no joke

06.06.2025

5 minute read

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A recent High Court decision offers a wake-up call for businesses and their advisors when navigating share purchase agreements (SPAs). When does informal conduct become a legal problem? And just how far do warranties really go?

The case centred on the sale of My Online Schooling Ltd and tackled whether a string of “off colour” emails between the Seller and the COO breached warranties in the SPA.

In short, they didn’t, but the judgment is a goldmine of lessons for buyers and sellers.

Warranties in SPAs

In share sales, warranties are promises that are made by a Seller about the target company (for example, the business operated by the company is compliant with laws, in not the subject of any disputes, maintains good financial hygiene, etc.).

In this case, two key warranties were as follows:

  • Compliance Warranty – that the company, and its directors, had complied with all relevant laws and regulations.
  • Employment Disputes Warranty – that no disputes or likely claims existed or were expected.

Whilst these seem simple on the surface, the devil is (as always) in the detail.

So, what happened?

After completion of the deal, the Buyer discovered some problematic emails between the Seller and the COO joking about drugs, drinking, and other unsavoury workplace matters. The buyer argued that the content of the emails evidenced breach of the warranties.

The Seller responded that these were private (friendly) exchanges. In short, they might have been tasteless, but they were not actionable.

Did the emails breach the Compliance Warranty?

Not quite.

Yes, the warranties covered the Companies Act 2006 (including compliance with director duties) but only in a professional capacity. Tasteless jokes via work email didn’t automatically lead to a breach of director duties. If there is no real-world harm, there is no breach.

Notably, the court refused to narrow the warranty to just regulatory breaches. But it also refused to expand it to internal company policies governing the subject matter of the emails, which weren’t explicitly mentioned in the SPA.

The lesson being that if a buyer (or their advisor) wants to include compliance with internal policies within the warranties, it must say so explicitly.

What about the Employment Disputes Warranty?

This one was tightly draw as the express terms of the warranty only covered legal disputes or the real risk of them. The emails weren’t enough. No complaints had been made. No one else even knew about them. In short, it there was no dispute, there was no breach.

Key lessons

Whether you’re selling your company or buying someone else’s, here’s what you need to know:

1. Context is king
The court doesn’t simply look at the conduct. Even if the content of communications is problematic, it will ask where, how, and why it happened and what was the effect. Personal emails (even unprofessional ones) may well not be enough.

2. Warranties have limits
Not every inappropriate act is a breach. In this case, the behaviour must:

• Fall within the director’s duties,
• Be legally or materially significant, and
• Impact the company’s operations.

3. Don’t rely on hindsight
Just because something looks off-colour post-sale doesn’t make it a breach. The court demands hard evidence of real-world impact.

4. Clarity wins
If you want internal policies to be covered by warranties, put it in black and white. Ambiguity will not serve the buyer.

5. Due diligence matters

If you’re buying, dig deep. As a buyer, you must not assume that broadly drafted warranties will cover every skeleton in the closet. If you’re selling, know what you’re signing and how your casual conduct might be scrutinised later.

Final thoughts

This case is a powerful reminder that warranties are not moral codes, they are contractual promises, and courts will enforce them with a cool, surgical precision.

For SME owners (especially those wearing multiple hats as director and shareholder) and their advisors, this case underscores the need for:

  • Precision in contract drafting,
  • Caution in communication (yes, even emails),
  • And sharp-eyed advice when the stakes (including reputational risk) are high.

If you’re planning a sale, or about to acquire a business, speak to your legal team early. Because if things go south, it’s not the jokes in your emails that will matter, it’s the words in your SPA.

How can Morr & Co help?

If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Corporate & Commerical team on 0333 038 9100 or email info@morrlaw.com and a member of our expert team will get back to you.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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