Disputes after completion of the sale and purchase agreement2022-03-28T12:10:12+00:00

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Disputes after completion of the sale and purchase agreement

A share transfer or asset/liability transaction is generally a complex process and has many pitfalls. It goes without saying that good advice on such a takeover contract is necessary, in which the agreements between the parties are clearly and correctly recorded.

Sale and Purchase agreements

Despite all the best intentions of the parties at the time of entering into the agreements, it may well be that a dispute arises regarding the meaning of certain wording in the sale and purchase agreement or related agreements. It could also be that certain aspects have not been covered at all in the share transfer agreement or not sufficiently. In these instances it is very important to seek legal advice in order to settle these matters by amending the agreement or by implementing the escalation procedure in the agreement. The latter should only be used when parties have tried their best to find a solution as going to court may not give you the answer that you are hoping for.

Post-acquisition disputes

We often have to deal with disputes that arise after an acquisition has taken place. For example, if the parties agree on what should be understood by different terms included in the agreement. Or when there is a disappointing turnover or goodwill. We often speak of an error; the agreement would not have been concluded – or would not have been concluded under the same conditions – if the facts had been correctly presented. It is important to be aware of the obligation of the buyer or seller to investigate and provide information.

In addition, a sale and purchase agreement is often accompanied by a subordinated loan or payment in instalments. It often happens that part of the purchase price is paid by the buyer in the form of a subordinated loan or in instalments and that the buyer is granted a right of suspension in respect of the obligations under that subordinated loan or instalment. In the event of an alleged breach of a provision of the takeover contract, this right of suspension shall then be exercised swiftly. Disputes often arise as to whether the buyer can invoke the right of suspension.

Other post-acquisition disputes may consist of:

  • Violation of guarantees; in the case of a guarantee, the seller guarantees that certain facts, which relate to, for example, the shares, or (parts of) the business operations, do or do not occur.
  • Infringement of warranties; in the case of an indemnification clause, the buyer is often fully compensated for the matters regulated in the indemnification clause. An indemnification generally relates to foreseeable risks of facts (communicated by the seller or resulting from, for example, a due diligence investigation) that are known or to be expected.
  • Infringement of non-competition clauses; if the vendor undertakes vis-à-vis the purchaser not to engage in competitive activities with the transferred company.

Legal possibilities

In the case of post-acquisition disputes, we often see that compliance, dissolution and damages are claimed. Destruction of the agreement, with an invocation of error, may be one of the possibilities, but in practice we often see that this may be excluded. However, this does not alter the fact that in some cases annulment can nevertheless be invoked.

The above points are some of the various disputes that can arise from a readmission agreement. If you, as a buyer or seller of shares or of an asset/liability transaction, are involved in a takeover dispute, please submit it to us. We will make a process analysis for you and act on your behalf if the case is brought to court.

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SPECIALIZED LAWYERS

These are our lawyers who are specialized in this area.

Hans Rijntjes

+31 (0)10 209 27 55
rijntjes@lvh-advocaten.nl
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Gentia Niesert

+31 10 209 27 77
niesert@lvh-advocaten.nl

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A right to compensation after termination of cohabitation without a contract or marriage?

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The Supreme Court issued an interesting judgment on the question whether a partner is entitled to compensation from the ex-partner after ending cohabitation without a contract (also referred to as: informal cohabitation).

Right to compensation of ex-partner in case of termination of cohabitation without contract or marriage?

The case is clear. A man and a woman lived together without a marriage, registered partnership or cohabitation contract. They have a child together. The partners lived in a house owned by the husband. The (mother of the) woman took care of an expensive renovation (€ 74,000) of the man’s house. The man was financially unable to take care of the renovation himself. The partners did not agree on the costs of the renovation. Subsequently, the relationship was broken off. The question is whether the woman has a right to compensation towards the man concerning the costs she paid for the renovation.

Judgment of the Court of Justice on the right to compensation of ex-partner

The Court rejected the woman’s claim because they saw no legal basis for the claim. There is no contractual basis, because there is no cohabitation contract or agreement on the costs of the renovation. Article 1:87 of the Dutch Civil Code, which deals with compensation rights between spouses and registered partners, does not apply either, because there is no marriage or registered partnership. Nor can there be a corresponding application of the article. Furthermore, the Court of Appeal notes that on the basis of what has been stated by the woman he cannot establish that there is a claim on the basis of unjust enrichment.

Judgment of the Supreme Court on the right to compensation and the role of reasonableness and fairness in informal cohabitation

The Supreme Court upholds the judgment of the Court of Appeal. In order to accept unjustified enrichment, it is necessary to establish that if the woman had not borne those costs, the man would have made those costs himself or would have been obliged to make them. Since the man did not have financial means to incur the costs, there is no reason to believe that he would have incurred them. Therefore, the mere fact that the woman incurred costs does not automatically lead to the conclusion that the man saved himself the costs.

However, according to the Supreme Court, the above does not alter the fact that there is a legal relationship between informal cohabitants that is partly governed by reasonableness and fairness. It continues:

“Even if, with regard to certain expenses, a right to compensation from one cohabitant to another cannot be assumed on the basis of an agreement concluded between the parties or on the basis of the other legal figures regulated in Book 6 of the Dutch Civil Code, such a right to compensation may, in connection with the special circumstances of the case, arise from the requirements of reasonableness and fairness referred to in Article 6:2 paragraph 1 of the Dutch Civil Code”.

The Supreme Court considered that it would then have been up to the woman to establish the special facts and circumstances which, according to standards of reasonableness and fairness, imply that she has a right to compensation towards the man. The woman catches the bone after all:

“The documents of the proceedings allow no other conclusion than that the woman has not stated any special facts and circumstances which, assuming that the man was financially incapable of paying the costs of the renovation himself and that the renovation has not enriched her, may nevertheless mean that she has a right to compensation towards the man resulting from the demands of reasonableness and fairness”.

In this specific case, therefore, no compensation is granted in the event of termination of cohabitation without a contract.

No agreement, but a legal relationship between informal cohabitants

The Supreme Court’s interpretation of the legal relationship between cohabitants is interesting. Apparently, the Supreme Court does not assume that cohabitation creates an agreement, but it does create a legal relationship that is governed in part by reasonableness and fairness.

Do you have any questions about your rights when ending informal cohabitation? Please contact Peter de Graaf or Hans Rijntjes.

Bouwe Bos

+31 (0)10 209 27 63
bos@lvh-advocaten.nl
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