The measure: promised minus received
Damages for breach of warranty put you in the position you would have been in if the warranty had been true. In a share or asset purchase, that is the difference between the value the business would have had if the warranties were true - the warranty true value - and its actual value given the breach - the warranty false value. It is a contract measure: what you were promised, minus what you got.
That is usually narrower than a misrepresentation claim, where the tort measure restores you as if the statement had never been made and can, on a deceit measure, reach the whole transaction.
MDW Holdings: value is judged at completion
In MDW Holdings Ltd v Norvill [2022] EWCA Civ 883, a buyer acquired a waste-management company for about GBP 3.58 million on warranties about environmental compliance, which turned out to be systematically breached. The judge valued the business at completion at GBP 3,341,276 if the warranties were true and GBP 2,958,676 given the breaches - a difference of GBP 382,600.
The sellers appealed, arguing that by trial no prosecution had happened and no permits were lost, so the buyer got a windfall for risks that never materialised. The Court of Appeal dismissed the appeal: the company was worth less at completion because of the regulatory jeopardy that existed then, regardless of how things later turned out.
No hindsight: the probability-weighted risk stays
The principle is that risks existing at completion reduce value at completion, and you cannot use hindsight to remove them. If at completion there was a material probability of, say, a regulatory fine, that probability reduced the value then - and the fact the fine never arrived does not claw the reduction back. The risk was real on the day, and the valuation captures it.
This cuts against the instinct that no harm means no loss. For warranty damages, the loss crystallised at completion in the form of a less valuable asset, even if the feared event never happened.
What later events can and cannot do
Post-completion evidence is not useless - it can illuminate what existed at completion (for example, actual trading results help fix the EBITDA or goodwill the business really had on the day). What it cannot do is rewrite the completion-date risk: you cannot say the regulator never prosecuted, so there was no risk. The risk is judged as it stood at completion.
So the evidence question is always anchored to completion: what did a reasonable valuation, on the facts then known or knowable, show the business was worth?
Practical consequences for buyers and sellers
For buyers, build the risk record during due diligence: document compliance issues, get expert assessments of exposure, and create a contemporaneous basis for a probability-weighted reduction in value. That evidence drives the damages if a breach is proven. For sellers, do the opposite: obtain legal opinions and regulatory confirmations showing risks were genuinely remote at completion, so a court is less likely to accept a large reduction.
And remember the misrepresentation overlay: MDW Holdings also accepted that a deceit measure could apply and remitted the question of additional damages on fraud principles - a reminder that proving the assurance was also a dishonest representation can unlock a larger recovery.
Use at the desk
Practical checklist
- Measure warranty damages as value-as-warranted minus true value, assessed at completion.
- Do not expect hindsight to reduce damages - risks existing at completion count even if they never materialise (MDW Holdings [2022] EWCA Civ 883).
- Use post-completion evidence to illuminate completion-date value, not to rewrite completion-date risk.
- Buyers: document compliance issues and expert risk assessments contemporaneously in due diligence.
- Sellers: obtain opinions and confirmations showing risks were genuinely remote at completion.
- Remember a misrepresentation or deceit measure can exceed the warranty measure - plead it where available.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
Product demo
Use the guide for context. Use Veqtor for the Word documents.
Watch Claude compare negotiation drafts and create a separate Word document with proposed tracked changes.
See Veqtor work with Word redlines