Representation vs Warranty
In business and legal contracts, there are often terms that are very confusing and almost like riddles. We all are aware of the concept of warranty as we get assurance from the manufacturer against defects and problems that may crop up in products that we purchase form the market. When the terms of such an assurance are not fulfilled, the aggrieved party in a contract can seek remedy. There is another concept called representation that is similar to warranty in a business contract. This article attempts to differentiate between representation and warranty, to understand the clauses in a contract better.
When you are buying a house from a party, you would find it difficult to verify facts that the seller has paid all his taxes up to the date of transaction. This is where representations and warranty come handy. Representations and warranties are merely facts that are not being spoken but implicit or understood in a contract that is being entered upon by the two parties.
Representations are facts that are made to encourage a party to enter a contract. Representations are assurances from a party to another to induce him to enter into the contract. It is a fact that precedes a contract. Representation contains information that is reassuring and helps a buyer to go ahead and buy with confidence. Representation is a part of past or existing fact that is deemed necessary to be communicated to the party so that he can make a fair assessment of the risk involved in the contract. Representations are very important for the purpose of a contract getting completed as they bridge the gap of information between the seller and the buyer. As a seller, the party must ensure that representations he is giving are true and correct to his knowledge so that, he is not found guilty of misrepresentation later on.
In a business contract, warranty implies that the product that the buyer is purchasing from the seller is free from defects and does what it is intended to do. Warranties are a part of the contract and as such appear on the contract. They are one part of the contract that covers the present, as well as the future. Warranty reflects the reliability of the product and assures the buyer that it will continue to perform satisfactorily as long as he makes use of the product normally. Warranty is often a condition that is most important for the buyer and is written clearly in the contract.
Warranties are promises that require full compliance from the seller as a breach of warranties often leads to cancellation of the contract by the buyer.
What is the difference between Representation and Warranty?
• Representations are facts that cover the past up to the signing of the contract and help the buyer to make up his mind in completing a contract
• Warranties are promises made by the seller to the buyer and are written explicitly in the contract
• Often, reps and warranties are combined together in a contract and written as seller represents and warrants the buyer.
• Representations assure the buyer about the validity of the seller and the arrangement while warranties take care of promises made about the quality and reliability of the product
• Representations take care of facts from past up to the present while warranties take care of present and the future.