Share purchase agreements typically include contractual time-limit provisions for the buyer to notify its claims to the seller and/or to bring the claim to the competent court or the tribunal. If the buyer fails to observe such a time limit, it may be barred from pursuing its claim. These clauses originate from common law but have now become part of international practice. Are they effective under Polish law?

On the one hand, no reported case law seeks to address this issue specifically regarding M&A disputes. There is, however, available case law related to similar clauses, notably, Subclause 20.1 of the FIDIC (Red Book) General Conditions. That clause applies to construction contracts and obliges the contractor to notify their claims under the contract within 28 days. If a contractor fails to give notice of such a claim within such time limit, the employer “shall be discharged from all liability in connection with the claim”.

Polish courts interpret this clause as introducing an absolute bar to the claim, resulting in the release of the employer. As explained by the District Court in Warsaw in the judgment of 1 July 2019, (Case no. XXV C 1324/16), such clauses should be regarded as a circumvention of Article 119 of the Polish Civil Code (PCC), which has mandatory effects and prohibits the Parties to extend or shorten the statute of limitation through contract. According to the District Court, the clauses such as Subclause 20.1. FIDIC go even further beyond what is already prohibited by Article 119 PCC. Accordingly, the clause was declared invalid. Other similar decisions were issued e.g. by the District Court in Warsaw on 11 June 2012 (XXV C 567/11) and 11 July 2012 (XXV C 647/11), and the Warsaw Court of Appeals on 8 July 2022, (VI ACa 1001/21).

The reasoning applied by Polish courts in those matters can arguably be used in other contexts, including in the post-M&A disputes. This line of argument may be a lifeline for buyers who missed their deadlines under SPAs.

At the same time, some of the aforementioned judgments distinguished between claims based on law (for which, contractual time limitations clauses are ineffective), and claims based purely on contract, for which time limitations clauses are effective. The distinction between the two categories of claims, however, is blurred. Still, based on this line of thought one could argue that a contractual time limitation in an SPA for claims related to breaches of warranties and representations is effective, given that the regime of liability for the breach of R&W under Polish law is almost exclusively contractual in nature.

While the uncertainty remains, understanding the nuances of Polish law remains crucial for both buyers and sellers to protect their interests effectively.

by Wojciech Sadowski