Chancery Refuses to Order Specific Performance Due to Inaccurate Representations and Warranties
Restanca, LLC v. House of Lithium, Ltd., C.A. No. 2022-0690-PAF (Del. Ch. Jun. 30, 2023)
The parties seeking specific performance of an agreement must establish a clear right to performance, including that all conditions to closing have been met. In this case, a buyer refused to close on the acquisition of an electric scooter company, and the seller sought specific performance in the Court of Chancery. In its post-trial decision, the Court denied that relief because the sellers inaccurately represented that the seller’s equity holders had executed a secondary sale agreement and that the seller had delivered certain financial statements to the buyer. Because neither of those things had in fact occurred, not all conditions to closing were satisfied and the buyer could walk away from the transaction. Further, because Delaware is a pro-sandbagging jurisdiction, it did not matter whether the buyer knew (as seller argued) that representations were inaccurate, and holding seller to its representations did not create an unjust result.