Breach Of Warranty Compensation

Summary

The investors proposed formula for compensation under a Share Purchase Agreement (SPA) may not align with the agreements terms, which allow recovery for direct losses only. Direct losses are those directly resulting from a breach, while indirect losses are consequential and typically not recoverable unless specified in the contract. The gross-up formula could inadvertently calculate for indirect losses and lead to double recovery, which contradicts the SPAs stipulation of compensating only for direct losses. Reviewing the SPAs language on loss recovery and consulting a legal professional is advisable to ensure compliance with the agreements terms.

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The agreement of the parties is that investor will be entitled to direct losses only for a breach of a warranty. But then proposed the formula mentioned. The formula does not align with the agreement to award direct losses only does it
It sounds like the formula proposed might indeed be calculating compensation for indirect losses rather than direct losses, which could be contrary to the agreement. For clarity:
- Direct Losses: Typically refer to losses directly resulting from the breach.
- Indirect Losses: These are consequential and not directly tied to the breach unless specified.
If the SPA explicitly states only direct losses are recoverable, the gross-up formula might not align with that. You may want to review the SPA closely or consult a lawyer to ensure compliance with the terms. Is there anything specific you need help with in reviewing the SPA?
Tell me why gross up does not align with it analysis
In the context of your situation, the gross-up formula does not align with the analysis for a few reasons:
- Direct vs. Indirect Losses: The SPA stipulates recovery for direct losses only. The gross-up formula may inadvertently calculate for indirect losses if it includes additional compensation elements like taxes or shares that are not directly related to the breach itself.
- Double Recovery: Grossing up could lead to receiving more than the direct loss amount, which contradicts the SPA's terms of compensating only for direct losses.
To ensure alignment, review the SPA's language regarding loss recovery and consult a legal professional for a detailed analysis.