Representations and Warranties in Contracts

Representations and Warranties in Contracts (1)

There are many different mechanisms, provisions, and clauses in a contract that parties to the same must be aware of. One of such contractual mechanisms are representations and warranties. These important aspects of contracts deal with the distribution of risk. Such representations and warranties are necessary to negotiate ahead of time among the parties involved.

What is a representation? 

            It is a fact within the contract that is held true among the parties. Those who sign the contract want an assurance that a fact, which usually is the influencing fact for signing the contract, will remain true during the contractual relationship. These factual statements usually regard items like titles, claims, and financial statements. Usually, every representation is not needed to be proven by the parties; however, if are presentation is found to be false by one of the parties, this becomes an unlawful act of misrepresentation. For such acts, damages can be sought as false representation is intentional fraud.

            A warranty within a contract is a commitment or stipulation that a certain fact within the contract is true or will be as promised. Therefore, if a warranty turns out to be false, then the recipient (a party accepting a risk by signing the contract) will be protected. Warranties usually deal with goods and services so that the recipient party is assured of a statement, for example the quality of a good they have purchased. If warranty is breached, then the damages that are sought by the receiving party will equal the difference between the warranty value and the real value. The warranties of a contract are seen as contractual obligations as they are the foundations of the contract. Warranties can be expressed, implied for merchant ability, or implied for fitness for particular purpose.