International Mergers & Acquisitions Assessment
Preparation of the Memorandum to the Supervisor
It is now December 2022.
Your name is Mina Ravat and you are working at the Dubai office of international law firm Charter & Henry. Your firm acted for Mansoor Al-Nabhani, who completed his purchase of STL from MegaCorp Plc in January 2022. The transaction was structured as a share sale and purchase, with a final purchase price of £190 million. The transaction was subject to English Law and the jurisdiction of the English courts under the terms of the Share Purchase Agreement (“SPA”).
Mansoor Al-Nabhani is unhappy because after completion he discovered that a supply contract between STL and the supplier BioCore Inc (the “BioCore Contract”) contains provisions requiring STL to make a substantial minimum purchase of goods every month for the next four years. Your client estimates that this leads to an unforeseen total cost of almost £5 million for STL.
On further investigation, the following facts emerge:
- The BioCore Contract does indeed contain a requirement for STL to make an unusually large minimum purchase of goods each month.
- The SPA contains a warranty that “No Key Contract of Target contains any unduly onerous provisions”.
- In relation to this warranty, the Disclosure Letter states that “The BioCore Contract contains certain restrictions and purchase requirements.”
- During due diligence, the BioCore Contract was also provided to Charter & Henry, but the issue of the minimum purchase requirement was never reported to Mansoor Al-Nabhani.
- The SPA contains the following provision: “Save for matters disclosed in the Disclosure Letter, no other matter of which the Buyer has actual, constructive or imputed knowledge shall prevent the making of a claim for breach of Warranty.”
- The SPA also contains the following provisions:
- 1 – The total liability of the Seller for all claims for a breach of Warranty shall not exceed £190 million.
- 2 – The Seller shall not be liable for any claim for breach of Warranty for which the Buyer can make recovery from a third party.
- 3 – The Seller shall not be liable for any claim for breach of Warranty unless:
- The Seller’s liability in respect of such claim exceeds £1,000; and
- The amount of the Seller’s liability in respect of such claim (together with any connected claims) when aggregated with the Seller’s liability for all claims exceeds £20,000, in which case the Seller shall be liable for the whole amount claimed (and not just the amount by which the threshold in this clause is exceeded).
Prepare a Memorandum (1500 words) to your Supervising Solicitor, Nisha Dewan, setting out the legal position in relation to these matters.
As a professional Memorandum it should not include footnotes or references. However, when you submit your assessment, you should also submit a Bibliography as a separate document, outlining which resources you used when preparing your advice. This Bibliography must comply fully with OSCOLA.
The memorandum must be supported by case laws extensively. Following case laws can be relied upon in addition to other case laws.
- Infiniteland Ltd and Another and Artisan Contracting Ltd and Another
- Levison fashion
- Eurocopy v Teesdale 
The theory of actual, constructive and imputed knowledge must be examined.
The following questions must be answered
1) Is there a breach of warranty?
2) Is there an effective specific disclosure to prevent liability?
3) Is there an effective general disclosure to prevent liability?
4) Might buyer’s knowledge prevent liability?
5) Do any Seller’s limitations apply?
6) Possible solutions
Please use the following style.
Font: Arial 11 to be used
Headings: Presented in bold type. “Re” is never to be used in opening heading.
Numbering: All headings (other than memo initial heading) to be numbered, using numerical system only. Example: 1, 1.1, 1.1.1/2, 2.1, 2.2.2
Line spacing: Single
Text layout: Justified
References to dates: Example: 12 August 2021 (no “st” or “th”)
References to cases: Case names to appear in italics. Example: Williams & Glyn’s Bank v Boland
References to statutes: Include full name. Example: Companies Act 2006.
References to statutory provisions: Use “section” (lower case “s” unless this is in the first word in a sentence, in which case a capital letter should be used). Examples:
- The relevant statutory provision is section 1 Companies Act 2006.
- Section 1 Companies Act 2006..…
Sign off: Kind regards
SAMPLE MEMORANDUM – THIS IS ONLY SAMPLE – TO BE USED FOR HAVING AN UNDERSTANDING OF THE STRUCTURE ONLY- DISREGARD THE LEGAL CONTENT
MEMO TO SUPERVISOR
Students should assume that this Memorandum has been prepared to advise on the potential liability of a buyer of a business for environmental issues affecting a property that it may acquire.
To: Clare Wylde
From: Current Trainee
Subject: Fielding Real Estate Group Limited (“Fielding”) – Environmental Issues at Uppingham Road Premises (the “Site”)
Date: 1 November 2021
As you requested, I have researched the risk of liability for Fielding as purchaser of the assets of LCC Properties Limited (the “Business”) if the Site, which is a key asset of the Business, is found to be contaminated.
1 Legal Position – Environmental Protection Act 1990 “(EPA 1990”)
1.1 Local Authority Duty
Under section 78B EPA 1990, Leicester City Council (the “Council”) has a duty to investigate possible contaminated land, and can then serve a remediation notice which requires the contamination to be dealt with.
In order for this to occur, the Site must be contaminated, meaning that it is causing significant harm, or creates a significant possibility of such harm (section 78A(2) EPA 1990). There must also be a “contaminant linkage”, requiring the presence of a contaminant, pathway and receptor. The prior industrial use of the Site creates the risk that it may constitute contaminated land. If this is found to be the case, the Council may serve a remediation notice.
1.2 Class A Persons
The Council will first seek to identify a Class A person, as this group has primary responsibility for remediation. This is a person who caused or knowingly permitted the contamination (section 78F(2) EPA 1990), and would include the original owner of the Site, when it was used for industrial purposes. It may additionally include any subsequent freehold owners, who fail to deal with the contamination. Fielding may, therefore, come within this definition within a time of acquiring the Site, and be at risk of receiving a remediation notice.
1.3 Class B Persons
However, if a Class A Person cannot be found, the Council might then require a Class B person to clean up the Site. A Class B person is the owner or occupier of the Site (section 78F(4) EPA 1990) and so would include Fielding from the outset.
In conclusion, there is a risk that Fielding could receive a remediation notice under the EPA 1990 if it goes ahead with the purchase of the Site as part of the asset acquisition.
There are a number of possible solutions that can be explored to protect Fielding:
- Price reduction;
- An indemnity in the Share Purchase Agreement; or
- Excluding the Site from the asset acquisition.
I hope that this overview of the position assists, but do let me know if you wish me to do any further work on this matter.