Representations and Warranties

Representations and Warranties are statements and assurances made by parties in a contract about facts, conditions or circumstances that are important to the agreement. Representations generally relate to existing or past facts, while warranties are promises that certain facts are true and will remain true as specified in the contract.

In simple terms: Representations and warranties are ways of saying, "This information is true and we're standing behind it." For example, a company may state that it legally owns its intellectual property and has the authority to enter into the contract.

How It Works

Most contracts include reps and warranties about critical facts. You're confirming legal authority to sign. Ownership of assets. Compliance with laws. Accuracy of information you provided. Whether you own intellectual property or have the right to license it.

The distinction between them matters in disputes. A representation is a statement about something true now or in the past. A warranty is a promise something will stay true during the contract term. That difference determines remedies if you're wrong.

Why Legal & CLM Teams Should Care

Reps and warranties are where risk concentrates. When you make a rep, you're accepting liability if it's false. That's why legal teams spend time negotiating them carefully.

Smart teams negotiate reasonable reps. They carve out exceptions for things they can't verify. They don't promise things outside their control. A vendor shouldn't rep that a customer's systems will work with their product if the customer's infrastructure is unreliable.

Example Use Case

A software company selling to a competitor reps that it owns all IP in its product and no third party has any rights to it. Post-closing, evidence emerges that the software uses GPL-licensed open-source code the seller failed to disclose. The buyer can't commercialise without honouring GPL terms. The buyer claims breach of the IP warranty and demands indemnification. The deal unravels.

This happens because someone didn't do IP homework before making broad reps.

How It Relates to Adjacent Concepts

Reps and warranties connect to indemnification clauses that let you recover when a rep turns false, intellectual property rights that determine ownership and limitation of liability provisions that cap exposure. A breach of contract happens when a rep or warranty is false. These clauses work together to determine who bears risk when facts don't match promises.

FAQs

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

A representation is a statement about facts that exist or existed. A warranty promises something is true and will stay true during the contract term.

Why do reps and warranties matter?

They let you verify important facts before signing and establish who's liable if those facts turn out to be false.

What happens if a rep or warranty is wrong?

The other party can usually seek damages, indemnification or termination rights depending on what the contract says.

Related Terms

• Warranty Breach
• Intellectual Property Rights
• Indemnification Clause
• Breach of Contract
• Limitation of Liability
• Master Service Agreement

Manage contract risk and negotiate reps and warranties carefully with SpotDraft Contract Management. Or request a demo to see how teams streamline contract review and management in one platform.