CASE

Alpha Inc. enter into a contract with Beta plc for significant works to be carried out to their head office premises. When the works are complete, Alpha resume full operations from the refurbished premises. Two years later, Alpha decide to sell the premises, and enter into a contract of sale with Delta GmbH.

In terms of the contract between Alpha and Delta, Delta must satisfy themselves on the quality of the premises. Alpha will not provide any warranties to Delta in relation to the premises or their condition. Delta buy the premises from Alpha for their full market value of €5 million. This price is based on the premises being in good condition, with no major works being required.

A year after Delta move into the premises, cracks start to appear in some of the walls. Investigations show that the cracks are due to work having been carried out defectively by Beta, in breach of their contractual obligations to Alpha. Further investigations determine that it will cost €1.5 million for the problem to be repaired. The nature of the problem means that Delta could not have found out about it before the sale.

There is no breach of contract by Alpha that would allow Delta to raise proceedings against Alpha. Alpha refuse to transfer their rights under the works contract with Beta to Delta. Having received full market value for the premises, Alpha have suffered no loss as a result of Beta's breach of contract.