A success in the Court of Appeals regarding representations and warranties
The president of a company’s management board – while taking care of his personal interest – cannot question representations and warranties that have been made by him if other persons, acting in trust of those representations and warranties, took specific actions – these were the main motives of the Kraków Court of Appeals’ verdict, on grounds of which the appeal from the Kraków District Court’s verdict – favorable for a client of our law firm – was dismissed.
The case regarded an acquisition of shares of a limited liability company and representations and warranties (RAW), that have been made during the transaction – the share acquisition contract included a clause, under which the president of the company’s management board assured, that all transactions that the company was a party of are included in the company’s accounting documentation and as of the day of the transaction the company does not have any other obligations. After few months, the former president of the management board demanded payback of a loan, that was given to the company a few years back. Our law firm represented the company in court as defendant and stated that making representations as above shall be interpreted as a relief from debt, and the actions of the former president of the company’s management board shall be regarded as an abuse of his personal rights.
The District Court and Court of Appeal in Kraków unanimously stated, that such claim by a former president of the management board does not find any legal ground, because by making a aforementioned representation the company was relieved from debt. Furthermore, such actions shall be deemed as inconsistent with the principles of community life, especially with the rule of honesty. The verdict is legally binding.
The case was led by advocate Łukasz Gładki and advocate Miłosz Tatarczuch from MyLo law firm.