Commercial Division Blog
No Claim for Breach of Representations and Warranties When Contract Waives Such Claims
On June 11, 2015, the First Department entered a decision in Cambridge Petroleum Holdings, Inc. v. Lukoil Ams. Corp., 2015 NY Slip Op. 04939, enforcing a contractual limitation of claims.
In Cambridge Petroleum Holdings, the defendant sold a "financially distressed subsidiary" to the plaintiff "for one dollar in exchange for a $25 million cash infusion into" the subsidiary "in the hopes that plaintiff could turn the company around." The parties' stock purchase agreement "explicitly limited defendant's requirement to indemnify plaintiff to certain circumstances, such as income tax payments and third-party claims." The plaintiff subsequently brought claims against the defendant for breach of representations and warranties unrelated to the listed exclusions. The trial court denied the defendant's motion for summary judmgent based on the limitation of liability in the stock purchase agreement. The First Department reversed, explaining:
Plaintiff's causes of action herein are not for damages arising from such claims, but rather, are for breaches of the warranties that defendant allegedly made directly to it. These claims are not permitted under the agreement. That these restrictions leave plaintiff without a remedy is of no moment, as a party may not rewrite the terms of an agreement because, in hindsight, it dislikes its terms.
(Internal citations omitted) (emphasis added).