My friend Ken Adams has been proclaiming his opposition to the term represents and warrants (or representations and warranties). He offers a list of reasons why this usage is supposedly “pointless and confusing”; he thinks the proper phrasing is just represents, “because in legal writing it’s standard to use the verb represent to introduce any kind of fact.”
I have to disagree with Ken.
Table of contents
Breach of warranty carries different proof requirements, and different remedies, than misrepresentation
Suppose that Vendor stated in a sales contract, Vendor warrants X. Certainly Vendor would be asserting that X is true, just as if Vendor were making a representation instead of a warranty.
By law, though, making an assertion of fact is only part of what Vendor is doing. Because Vendor is using a term of art, warrants, the parties are also:
- agreeing to allocate to Vendor the economic risk that Customer might incur losses if Assertion X turns out not to be true (probably subject to a limitation of liability);
- waiving what would otherwise be the requirement, as a prerequisite to recovery, that Customer prove Vendor’s negligence or fraud in asserting that X was true;
- likewise waiving any requirement that Customer prove its reasonable reliance on Vendor’s assertion;
- establishing that Customer is not entitled to tort remedies against Vendor for misrepresentation, such as rescission or punitive damages, if Assertion X proves untrue.
In contrast, if Vendor were to represent X, all it would be doing is asserting that X was true. If X were to prove untrue, and Customer wanted to sue Vendor, it would have to jump through some additional proof hoops about scienter and reasonable reliance.
There’s a trade-off, though: if Customer did successfully jump through those proof hoops, then damages would not be its only remedy against Vendor: it could demand rescission and perhaps punitive damages, neither of which is normally available in a breach-of-warranty action.
FOOTNOTE: In a contract for the sale of goods, if Vendor were only to represent that X were true, that representation might well constitute a warranty anyway under the Uniform Commercial Code. UCC § 2-313 provides that, if the representation is related to the goods and forms part of the basis of the bargain, it’s deemed a warranty, no matter what it’s called.
For more information, see this note; see also Tina L. Stark, Nonbinding Opinion: Another view on reps and warranties, Business Law Today, January/February 2006 (responding to Ken Adams; accessed Oct. 18, 2008).
Using represents only
Conceivably, in a sales contract, Vendor might want to say, Vendor represents X, BUT DOES NOT WARRANT IT.
Assuming that UCC § 2-316‘s conspicuousness requirements are met, Vendor thereby disclaims the indemnity obligation associated with a warranty.
And so, if Customer wants to recover anything from Vendor if X turns out not to be true, then Customer have to jump through the usual proof hoops for misrepresentation or fraud, as summarized above.
Using warrants only
But that doesn’t mean Vendor will always be willing to make a representation instead of a warranty. Vendor might not want Customer to have a shot at rescission and/or punitive damages. For that reason, Vendor might be willing to warrant X, but not to represent it.
When to ask for both
Whatever kind of a deal it is, sales or otherwise, Customer ought to consider asking Vendor both to represent AND warrant X, so it gets a shot at both the warranty indemnity and the fraud/misrepresentation remedies.