464 16 Key Provisions of the Acquisition Agreement
Specifications under legal background rules: caveat emptor. In the absence of
particular representations, warranties, or covenants, the specifications of the object
are determined by legal background rules. A party should therefore understand
what its rights and obligations would be if the parties did not reach agreement on a
particular question.
To begin with, the contractual specifications of the object are governed by the
law governing the contract.^2
From a contract law perspective, there are four preliminary questions influenc-
ing contents of the legal background rules. What is regarded as the object in a
share deal or an asset deal? Is the transaction governed by rules applicable to the
sale of movable goods or rules applicable to the sale of rights?^3 When is there an
enforceable promise? Is there a classification of promises?
However, the traditional starting point is that the specifications of the business
enterprise are determined by the caveat emptor principle: if the seller has prom-
ised nothing, the buyer cannot expect anything. This rule can apply even where
the object must have “normal qualities” under the legal background rules.
A business enterprise cannot be deemed to have any normal qualities that
would be common to all or most business enterprises, because all business enter-
prises are different.
In an asset deal for the sale and purchase of a business enterprise, the main rule
is therefore that the business enterprise must comply with the agreed specifica-
tions but does not have to comply with any statutory specifications – the main rule
is that there are no particular statutory specifications. The specifications of the ob-
ject should therefore be based on express contract terms. This applies where the
sale is regarded as the sale of a business enterprise (say, the business of a transport
firm) rather than as the sale of particular goods (say, all ten Scania trucks owned
by that transport firm). In the latter case, the agreed specifications can be comple-
mented by legal background rules setting out the normal specifications of such
particular goods (the expected quality of a Scania truck).^4
In a share deal, the main rule is that the vendor sells rights attaching to shares
and not a business enterprise. In many countries, the seller of a right is responsible
for the existence of that right (veritas) but not for its quality (bonitas).^5 However,
in some countries, attempts have been made to regard the sale of a large block of
shares as the sale of a business enterprise. This has led to problems of interpreta-
tion (see below and section 16.4).
Specifications under legal background rules: information, interpretation, ex-
ceptions. The main rule of caveat emptor is complemented by a number of core in-
formation and interpretation rules which can make the vendor responsible for the
(^2) See Articles 1(1) and 12(1) of Regulation 593/2008 (Rome I).
(^3) See, for example, Mäntysaari P, Mängelhaftung beim Kauf von Gesellschaftsanteilen.
Swedish School of Economics and Business Administration, Helsingfors (1998).
(^4) See DCFR IV.A.–2:302; PECL Article 6:108. See also CISG Article 35.
(^5) DCFR III.–5:112. For example, § 9 of the Finnish and Swedish Promissory Notes Act
(skuldebrevslagen) lays down such a principle. Under German law, there is also a re-
lated distinction between the liability of the vendor of rights (Rechtsmängelhaftung) and
the liability of the vendor of movable good (Sachmängelhaftung).