united-states contract-law
What&#39;s the difference between a &quot;representation&quot; and a &quot;representation and warranty?&quot;
<p>From what I understand, a <a href="https://definitions.uslegal.com/r/representation/" rel="nofollow noreferrer">"representation"</a> is a statement of fact that underpins e.g., a contract.</p>

<p>My understanding is that a <a href="https://en.wikipedia.org/wiki/Warranty" rel="nofollow noreferrer">"warranty"</a> is a promise that if something isn't true, it will be "made true" during the course of the warranty's life. E.g. "If your widget doesn't work within the first year of sale, we'll give you another one that works."</p>

<p>Within the above context, I am confused by the dual term "representation and warranty" or "represents and warrants" in a contract. What exactly does it mean? Put another way, how can something be both a statement of fact and a promise? Or does a term that draws on two other terms have a "third" meaning?</p>

<h1>What is a representation and why are they put in contracts?</h1>
<p>From a practical perspective, a contractual representation is a statement of fact in a signed writing made at an easily provable time that, if false, will support a claim for fraud upon showing the other elements of a claim for fraud that are not also included elsewhere in the contract (e.g. knowledge of falsity, the other party's lack of knowledge of falsity and damages). Some other elements of a common law fraud claim (e.g. publication of the statement to the other party, justifiable reliance, and materiality) are often also established on the face of contract that contains representations identified as such.</p>
<p>In a close case, the classification of a statement as a &quot;representation&quot; may also tip the scales if the status of a statement as a statement of a presently existing fact (which a representation must be to be actionable in a fraud action) is disputed.</p>
<p>If a representation concerning a key fact foundational to the contract is not true, that might provide a basis to rescind the contract based upon mutual mistake (even if it doesn't amount to fraud).</p>
<p>Proof that a false representation was intentionally false may give rise to claims for punitive damages and a right to rescind the contract in addition to a claim for compensatory damages.</p>
<p>Representations in a contract also simplify the proof of preliminary facts like the place of incorporation of the signing party, the addresses of the parties, the authority of the person signing it to do so, the fact that someone is not in military service, etc., in a lawsuit arising from the contract on any theory.</p>
<p>Sometimes a representation will &quot;estop&quot; a party from asserting something contrary to that representation in litigation. For example, if the seller represents that the transaction is a consumer transaction, and then tries to say that a consumer protection act claim does not apply because it is not a consumer transaction later on in court, when a dispute arises from the transaction, this argument contrary to the representation in the contract is likely to be summarily dismissed based upon that representation.</p>
<p>As another example, a party might represent that they agree that $500 an hour is a reasonable fee to pay an attorney in the event that a dispute arises under the contract and a prevailing party in litigation becomes entitled to attorneys' fees, which might reduce litigation over whether a party's attorneys are charging reasonable rates in that context.</p>
<p>Similarly, a contractual representation concerning authority to sign is binding on the party for which the signature is made, even if that person doesn't actually have the authority to do so under what is known as the &quot;apparent authority&quot; doctrine in agency law.</p>
<p>And, representations often provide context for the transaction that make it easier to interpret other provisions of the contract that would otherwise be ambiguous. For example, a representation that a transaction is being entered into solely for economic business purposes may help a court decide what other representations and disputes are and are not material to the parties, and might cause a court to decide that non-economic damages (i.e. emotional distress) should not be allowed even with respect to fraud claims arising from a misrepresentation (since non-economic damages are as a default rule allowed in connection with fraud claims in many jurisdictions).</p>
<h1>What are warranties and covenants and why are they put in the contracts?</h1>
<p>A warranty or covenant is a promise that something will be the case for which there is a remedy if it is not true, without regard to fault on a strict liability basis. Relief for a breach of warranty is generally limited to compensatory damages if breached, and would not generally provide a ground to rescind a contract, but a breach of warranty claim much easier to prove in court because it often doesn't require nearly as much evidence to prove in court as a fraud claim. The evidence beyond the contract itself in a breach of warranty claims is usually in the possession of the aggrieved party prior to bringing a lawsuit.</p>
<p>In a fraud claim based upon a representation, in contrast, some of the facts that must be proved to prevail in court (e.g. the knowledge of the person making the statement at the time that the statement was false) can usually only be obtained from testimony or out of court statements from an opposing party, or made to an opposing party.</p>
<h1>Why call something both a representation and a warranty?</h1>
<p>One both represents and warrants something in a contract so that both sets of remedies are available if the statement proves to be incorrect.</p>
<p>There is an easy to litigate remedy of money damages if the statement is not true, and harder to litigate fraud remedies if the statement meets the additional conditions.</p>
<h1>Other Fine Points</h1>
<p>N.B. There are other kinds of contract terms in addition to representations and warranties, such as conditions precedent. But, they are beyond the scope of the question and usually don't appear in a representations and warranties (a.k.a. &quot;reps and warranties&quot;) section.</p>
<p>A slightly less common phrase is &quot;represents, warrants and covenants&quot;, with the notion being that a warranty usually concerns something that you are promising is true at the time that the contract is signed, while a covenant is something that you promise will be true in the future or on an ongoing basis (sometimes running with the land when real estate is concerned).</p>
<p>So, you might &quot;warrant&quot; in a sale of real estate contract that the house you sold someone is free from defects and &quot;covenant&quot; that you will forever refrain from building any other building in a subdivision that impairs its view of the mountains. Or, you might warrant in a corporate bond contract that no more than 5% of a borrower's accounts receivable are currently overdue, and covenant that you will never let more than 10% of the borrow's accounts receivable enter overdue status.</p>
<p>But, in modern American English legal writing, the distinction between a warranty and a covenant has largely collapsed and even many sophisticated big business contract lawyers no longer use &quot;represents, warrants and covenants&quot; language in their contracts.</p>

<p>English law answer:</p>

<p>There are three types of contractual terms: conditions, warranties, and innominate terms.</p>

<p>Condition: a term which, if broken, allows the disappointed party to sue for damages and cancel the contract</p>

<p>Warranty: a term which, if broken, allows the disappointed party to sue for damages, but they cannot cancel the contract </p>

<p>Innominate term: a term which, if broken, allows the disappointed party to sue for damages, and, depending on the gravity of the breach, may allow them to cancel the contract.</p>

<p>In most written contracts clauses stipulate whether they are a condition or warranty.</p>

<hr>

<p>Representations:</p>

<p>A representation is any statement of fact made by one party during the course of making an offer. (This car here can go 100 km an hour, its never been driven before, this horse is healthy etc)</p>

<p>In the UK, if a person agrees to enter a contract, and one of the reasons for entering the contract is because of the representation, then if the representation turns out not to be true, you may sue for damages, and/or, depending on the breach, cancel the contract</p>

<p>For more information on the  topic covered by this answer see: <a href="http://www.e-lawresources.co.uk/Conditions%2C-warranties-and-innominate-terms.php" rel="nofollow noreferrer">http://www.e-lawresources.co.uk/Conditions%2C-warranties-and-innominate-terms.php</a></p>

<p>This link contains case references for those who like to see authorities.</p>

<p>When used together "Representations and Warranties" the section of the contract may consist of one or more parties stating facts (representations) and promising to be held financially liable (warranties) to the extent the "facts" turn out to be incorrect.For example -  I represent that the product I am licensing to a manufacture does not infringe any U.S. patents and I warrant that representation by committing to pay for their defense if they are sued due to patent infringement.</p>

<p>Note that "warranty" has two meanings. </p>

<p>Poole, Shaw-Mellors. <a href="https://www.amazon.co.uk/Contract-Law-Concentrate-Jill-Pool/dp/0198840446/ref=dp_ob_title_bk" rel="nofollow noreferrer"><em>Contract Law Concentrate</em> (4 ed 2019)</a>. p A8 at the back.</p>

<blockquote>
  <p><strong>Representation:</strong> A representation is a statement
  which induces the contract but which
  generally does not involve any binding
  promise as to truth. If a representation turns
  out to be false it may be an actionable misrepresentation.</p>
  
  <p><strong>Warranty:</strong> [1.] A warranty is a less important term
  of the contract (not going to the root of the
  contract) so that if it is breached the injured
  party would be adequately compensated
  by the payment of damages. If this term
  is broken, it is not therefore a repudiatory
  breach. </p>
  
  <p>[2.] The word warranty is also sometimes
  used in a more general sense to mean ‘a term’.</p>
</blockquote>

<p><a href="https://www.uclan.ac.uk/staff_profiles/richard-taylor.php" rel="nofollow noreferrer">Richard</a> and <a href="https://www.slaughterandmay.com/who-we-are/partners/damian-taylor/" rel="nofollow noreferrer">Damian</a> Taylor. <a href="https://global.oup.com/academic/product/contract-law-directions-9780198836599?&amp;lang=en&amp;" rel="nofollow noreferrer"><em>Contract Law Directions</em> (2019 7 ed)</a>.  p 118</p>

<p><a href="https://i.stack.imgur.com/GExos.jpg" rel="nofollow noreferrer"><img src="https://i.stack.imgur.com/GExos.jpg" alt="enter image description here"></a></p>

<p>p 106</p>

<blockquote>
  <h2>5.1.2 How to distinguish a term from a representation</h2>
  
  <p>The test used to distinguish a term from a representation is based on the parties’ objective
  intentions. As the parties are not normally conscious of the distinction when they make their
  contracts it is unlikely that a particular statement will be labelled as ‘term’ or ‘representation’.
  You should bear this in mind when tackling a problem question in an examination and realize
  that you cannot recognize a term from a representation merely by looking at the words used.
  It is necessary to look at the circumstances and ask what a reasonable person would think of
  a particular statement in its overall context. In <em>Oscar Chess Ltd v Williams</em> (1957), Mr Williams
  sold a car to the dealers, Oscar Chess Ltd. Mr Williams said that the car was a 1948 model
  because this is what the registration book stated. The car was in fact a 1939 model (worth
  much less). The dealers were obviously aggrieved because they had bought a ‘lemon’ and they
  claimed the difference in value between a 1948 model and a 1939 model as damages for
  breach of contract. <strong>Denning LJ explained very clearly the different ways in which the word
  ‘warranty’ is used [I embolded.]</strong> (you should read his judgment; as usual he explains complex issues in a
  simple, easy-to-read manner).</p>
  
  <p><strong>warranty (first sense)</strong><br>
   A warranty is a term of the contract, as opposed to a representation which is
  not part of the contract. A warranty constitutes a promise or guarantee which, if broken, automatically
  entitles the other party to damages to make good the promise.</p>
</blockquote>

<p>p 116</p>

<blockquote>
  <p><strong>warranty (second
  sense)</strong><br>
  The word warranty is also
  used to describe a term of
  a contract that is not a
  condition and gives the
  right to damages but not
  termination upon breach
  of the warranty.</p>
</blockquote>

<blockquote>
  <p>What's the difference between a “representation” and a “representation
  and warranty?”</p>
</blockquote>

<p>From Black's Law Dictionary:</p>

<blockquote>
  <p>A warranty differs from a representation in that a warranty must
  always be given contemporaneously with, and as part of, the contract;
  whereas a representation <strong>precedes and induces</strong> to the contract.
  [...] [U]pon breach of warranty, the contract remains binding, and
  damages only are recoverable for the breach; whereas, upon a false
  representation, the defrauded party may elect to avoid the contract,
  and recover the entire price paid.</p>
</blockquote>

<p>(emphasis added)</p>

<blockquote>
  <p>how can something be both a statement of fact and a promise?</p>
</blockquote>

<p>Representation and warranty pertain to different aspects: awareness toward inducement, and effectiveness.</p>

<p>A representation relates to the quality of entering a contract <em>knowingly</em>, that is, with awareness of something which induced the contract. But something that is true today might not necessarily be true, relevant, or effective in the future. Hence, the warranty pursues the <em>effectiveness</em> of what "<em>is or shall be as it is stated or promised to be</em>".</p>
