## Facts

- Ziff-Davis decided to sell certain magazine businesses and, through its agent, provided prospective bidders with financial information, including operating income statements.
- CBS submitted the highest bid and the parties executed a binding purchase agreement for the consumer magazine businesses.
- The agreement included express warranties by Ziff-Davis as to the accuracy of specified financial information.
- During due diligence, CBS concluded the warranted financial information was likely inaccurate and communicated its concerns to Ziff-Davis.
- Ziff-Davis rejected CBS’s objections and insisted the transaction close under the contract terms.
- CBS closed the transaction, with both parties understanding that closing would not alter either side’s previously stated positions.
- After closing, CBS sued for, among other claims, breach of express warranty based on alleged material inaccuracies in the warranted financial statements.

## Issues

1. Whether a buyer that doubts the truth of a seller’s express warranties before closing is barred from suing for breach of express warranty for lack of “reliance.”
2. Whether “reliance” in an express-warranty action requires the buyer’s belief in the warranted facts, or instead is satisfied when the warranty is part of the basis of the bargain.

## Decision

- The Court of Appeals reversed the dismissal and reinstated CBS’s breach of express warranty claim.
- The court held that a buyer’s pre-closing disbelief in warranted information does not relieve the seller of its contractual warranty obligations.
- The court concluded that the “reliance” element is satisfied by showing the buyer bargained for and accepted the warranty as part of the contract, not by proving subjective belief in the truth of the warranted facts.

## Legal Principles

- An express warranty is a contractual term; breach of express warranty is governed by contract principles rather than tort-based inducement concepts.
- For breach of express warranty, the relevant reliance is that the warranty was part of the basis of the bargain; proof of the buyer’s actual belief in the warranted facts is not required.
- A buyer may proceed to closing despite doubts about warranted facts and later sue for breach if the facts are not as warranted; closing alone does not constitute waiver of warranty rights.
- Fraud-style reliance (belief in truth and inducement) is distinct from the reliance concept applicable to contract-based express-warranty claims.

## Conclusion

The court held that when express warranties are part of the parties’ bargain, the buyer’s pre-closing skepticism about the warranted facts does not bar a post-closing action for breach of express warranty, and the buyer may affirm the contract and seek damages if the warranties prove false.


CBS Inc. v. Ziff-Davis Publ'g Co., 75 N.Y.2d 496 (1990)