Legal protection


No specific statutory provisions apply to defects upon conclusion of the contract and disruptions to performance upon closure of an acquisition. Accordingly, the provisions of the General Part of the Swiss Code of Obligations and the law of sale will apply.

A distinction is drawn between the following defects relating to the conclusion and fulfilment of the acquisitions:

  • pre-contractual liability / culpa in contrahendo
  • defects upon conclusion of the contract
  • disruptions to performance

Culpa in contrahendo

If the acquisition is not concluded, it may be the case that one of the parties has breached pre-contractual duties during the contractual negotiations. Breaches of duty of this kind may be punished under the institution of “culpa in contrahendo” and the party in breach may be held liable


  • An interested investor is used during contractual negotiations in order to manipulate the price, although the vendor has already determined which party will make the investment.
  • The interested investor thereby incurs unnecessary consultancy and representation costs and loses opportunities (lawyers’ and appraisers’ fees, failure to participate in other possible share deals, etc.).

Defects upon conclusion of the contract

A prerequisite here is the conclusion of a valid agreement.

In practice the following defects may arise:

  • vitiated consent
    • error as to the basis for agreement (Article 24 of the Swiss Code of Obligations)
    • intentional fraud (Article 28 ff. of the Swiss Code of Obligations)
  • error regarding the assets
  • error regarding the liabilities


  • Error regarding the assets
    • BGE 107 II 419 ff.
    • Facts: sale (of assets) of non-sellable stock overvalued in the accounts by two thirds
    • Consequence: error regarding the value of the stocks purchased, since the investor should have been able to rely on the fact that the vendor had complied with accounting rules when assessing the value of its stock (Article 666 and Article 960(2) of the Swiss Code of Obligations).
    • Legal basis: error regarding the basis of the agreement (Article 24  of the Swiss Code of Obligations)
  • Error regarding the liabilities
    • BGE 81 II 213 f.
    • Facts: incorrect warranty by the vendor regarding the liabilities
    • Consequence: claim by the vendor to the difference between the purchase price paid and the price which would have been paid had the actual liabilities been known
    • Legal basis: purchase price reduction (Article 205(2) of the Swiss Code of Obligations) and intentional fraud (Article 28).

Disruptions to performance

Share purchase = purchase of moveable property

Non-performance/inadequate performance

  • Obligor delay (Article 107(1) of the Swiss Code of Obligations)
  • Possibilities for obligee (Article 107(2) of the Swiss Code of Obligations), alternatively:
    • claim to performance in addition to damages owing to delay
    • immediate post-contractual withholding of performance, plus compensation of damage resulting from non-performance
    • withdrawal from the contract.

Warranty right in relation to share purchase = warranty right under the law of sale

  • Warranty of title (Article 192 ff.  of the Swiss Code of Obligations)
    • Seldom (e.g. appropriation of stolen securities by the rightful shareholder)
  • Quality warranty (Article 197 ff. of the Swiss Code of Obligations)
    • Securities seldom defective (torn certificates, absent coupons, etc.).

NB: no effective warranty in relation to share purchases without an express assurance

  • In cases involving share deals, the warranty rules do not apply to the business, but rather only to the securities.
  • Indication of a solution: assurances and warranties as to the existence of characteristics of the business
    • share vendor warrants to the investor the existence of
      • profitability
      • specific assets or customer relations within the business
      • see also BGE 79 II 159 and BGE 107 II 419 ff.)
    • the share vendor bears liability for warranted characteristics pursuant to Article 197 ff.  of the Swiss Code of Obligations
    • the investor is however then subject to a duty to carry out a prompt examination and to report any objections (see Article 201 of the Swiss Code of Obligations; see also BGE 107 II 422).
    • establishment of a guarantee framework within the share purchase agreement, designated “Representations and Warranties”
  • Absence of warranted characteristics:
    • Rescission or price reduction?
      • In the event of a claim seeking rescission, the courts may simply award compensation of the reduced value, unless rescission of the purchase is justified by the circumstances (see Article 205(2) of the Swiss Code of Obligations)
      • “If the reduced value claimed reaches the amount of the purchase price, the buyer may only claim rescission” (OR 205 Abs. 3).
    • Legal basis: price reduction
    • Exception: rescission (however, rescission is often excluded by the parties).
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