Term Sheets, Warranties and Representations – Investment and M&A Drafting Lessons from Hoffman v Finalto
In April 2026, Butcher J handed down judgment in Hoffman & Greenbaum v Finalto Group Limited & Gopher Investments [2026] EWHC 921 (Comm). For sponsors, investors, acquirers and management, the case highlights the risks that can arise in the interim period between signing headline terms and executing definitive long-form documentation. Where an equity term sheet forms part of the deal mechanics, a party who walks away from it or instructs counsel to stop work risks a repudiatory breach and substantial damages.
Background
Gopher acquired Finalto, a fintech business, from Playtech plc in July 2022. As part of the transaction, Gopher entered into an Equity Term Sheet (“ETS”) with the outgoing CEO, Mr Hoffman, and COO, Mr Greenbaum. The ETS provided for a post-completion holding company (“Holdco”), through which both executives would receive equity.
Alongside this, the parties entered into a sale and purchase agreement (“SPA”) and a Management Warranty Deed (“MWD”), under which warranties were given at completion. The definitive equity documents were to be agreed after completion, based on the ETS.
In October 2022, Gopher instructed its solicitors to cease work on those documents. In November, Hoffman and Greenbaum were dismissed. Gopher later asserted that the ETS had never been legally binding. The executives brought proceedings for breach of the ETS, while Gopher counterclaimed for fraudulent misrepresentation based on alleged warranty breaches under the MWD.
"Legally Binding, Subject to a Definitive Agreement"
Gopher argued that the ETS imposed no binding obligations, or alternatively that any obligations were conditional on the execution of definitive equity documents. This rested on the phrase “legally binding on the parties, subject to a definitive agreement”.
The Court rejected that interpretation. Construing the wording "subject to a definitive agreement" as a condition precedent would deprive the phrase “legally binding” of any effect. Instead, Butcher J held that the ETS created binding obligations immediately, to be superseded by later definitive agreements.
That finding was reinforced by several features of the document, including obligatory language in the key provisions, counterpart execution formalities and an exclusive jurisdiction clause, and a confidentiality obligation plainly intended to bite from signing. The good faith negotiation obligation reinforced, rather than replaced, the primary obligations. The Court found that the parties envisaged the definitive documents would be agreed by completion, but, if they were not, the ETS terms remained binding and their non-fulfilment would give rise to a claim in damages.
The key lesson is familiar but critical: labelling a document a “term sheet” does not make it non-binding. If parties intend certain provisions to be non-binding, that must be stated expressly. A clear distinction should be drawn between binding and non-binding provisions, and any “subject to” wording must be structured as a genuine condition precedent.
Where Warranties and Representations Overlap
The Court also addressed the relationship between contractual warranties and misrepresentation. Although Gopher’s fraud claim failed on the facts, the Court considered whether the warranties in the MWD also constituted actionable representations. This is important as misrepresentation claims give rise to different remedials and can fall outside agreed contractual liability caps.
Under English law, warranties generally do not constitute representations, as representations are pre-contractual statements. However, a warranty can reflect a prior representation depending on the facts.
In this case, the Court concluded that the warranties did also amount to representations, based on three factors:
First, the MWD and disclosure letter were executed before the SPA. This sequencing meant the statements could have induced entry into the SPA, addressing the timing difficulty identified in Sycamore Bidco Ltd v Breslin[2012] EWHC 3443 (Ch).
Second, the MWD contained an entire agreement clause which excluded reliance only on statements not expressly incorporated into the transaction documents. This implicitly recognised that incorporated statements (i.e. the warranties) could operate as representations. Rather than excluding all pre-contractual representations, the clause recognised that some might exist within the document.
Third, the MWD excluded liability for negligent and innocent misrepresentation but not fraudulent misrepresentation, again suggesting that representations might exist within the document.
Although the counterclaim failed because the statements were not shown to be false or dishonest, the analysis highlights that careful drafting is required to prevent warranties from doubling as representations in investment and M&A transactions.
Key Takeaways for Investment and M&A practitioners, sponsors, investors, acquirers and management
The judgment carries practical implications for everyone involved in negotiating, executing and managing investment and M&A transactions. The headline lessons go to the structure of the deal documents themselves, but the operational lessons are equally important: how a deal team handles the signing-to-completion period, how instructions to counsel are communicated and how disputes between the parties are managed before they crystallise into litigation.
Key Takeaways:
1. Term sheets can bite
The ETS was enforceable despite “subject to a definitive agreement” wording. Where mandatory language is used alongside an express statement of legal effect, courts are likely to find binding obligations. If only certain provisions are intended to bind, a clear binding/non-binding split clause is essential.
2. Manage the signing-to-completion gap actively
The dispute turned largely on conduct between signing and Gopher’s instruction to halt work. Deal teams should maintain clear records of decisions, instructions and changes in position. A unilateral decision to stop progressing definitive documents can carry repudiation risk if the underlying term sheet is binding.
3. Instructions to counsel are not internal correspondence
Clients regularly assume that telling their solicitors to pause or terminate work is a matter between them and their lawyers. Where a binding term sheet includes a good faith negotiation obligation, such an instruction may evidence repudiatory conduct. Deal teams should treat any decision to walk away from a binding term sheet as one requiring contemporaneous legal advice and, ordinarily, written notification to the counterparty.
4. Warranties and representations can overlap
The combination of sequential execution and drafting in the MWD led the Court to treat warranties as representations. This is particularly relevant in private equity transactions using separate management warranty deeds. Warrantors who wish to ensure that warranty claims are subject to the negotiated liability cap should, in addition to requiring entire agreement provisions to exclude all forms of pre-contractual statement, include an express confirmation that no party has relied on any statement as a representation.
How we may may you for advice on equity term sheets, management equity arrangements or investment and M&A transactions in general, please contact our Corporate Team.