Damages in M&A transactions

This paper aims to analyse the liability regime associated with the use of representations and warranties (R&W), one of the most outstanding contractual instruments to address the structural asymmetry of information and to assign risks of uncertain contingencies. The study departs from the absence of a rule, neither in the Spanish legal scholarship nor in the Spanish case law, that establishes how expectation damages should be calculated in cases of incorrectness or inaccuracy of R&W. Following the Anglo-American criterion, we propose that damages translate into money the difference at the time of the contract (or delivery, if appropriate) between what the company was worth and what the company as warranted would have been worth. This is both the conceptually coherent and the economically efficient rule.