Question 1

What's the difference between a representation and a warranty?

Accepted Answer

A representation is a statement of fact ('We have 500 active customers'). A warranty is a promise that the fact is and will remain true. In practice, lawyers pair them: 'Company represents and warrants that...' The distinction matters because misrepresentation can support a fraud claim (with potentially higher damages), while breach of warranty is a contract claim.

Question 2

What are common reps and warranties in a contract?

Accepted Answer

Authority to enter the contract, ownership of IP being transferred, no pending litigation that could affect the deal, no conflicts with other agreements, compliance with applicable laws, and accuracy of financial statements. Each one allocates a specific risk. If any are false, the other party has a claim.

Question 3

How long do representations and warranties last?

Accepted Answer

They typically survive for a defined period after the contract ends — often 12–24 months. Some reps (like IP ownership and tax compliance) may survive longer. The contract's survival clause should specify exactly how long each category of representation lasts. After that period, claims based on false reps expire.

Question 4

Can you disclaim warranties?

Accepted Answer

Yes — 'AS IS' disclaimers are common, especially in software and technology deals. A warranty disclaimer says 'we make no promises about X.' Under the UCC, implied warranties of merchantability and fitness for a particular purpose can be disclaimed if the language is clear and conspicuous. But you can't disclaim warranties for fraud.

Question 5

What happens if a representation turns out to be false?

Accepted Answer

The other party can claim breach of contract and seek damages. If the misrepresentation was intentional, they might also have a fraud claim — which can be worth more (potentially including punitive damages). Some contracts include specific indemnification for breaches of reps and warranties, sometimes with escrow holdbacks to ensure payment.

Representations and Warranties

Definition

In Practice

Common in these contract types

Frequently asked questions about representations and warranties

Create a contract with proper representations and warranties clauses