I certainly didn't mean to suggest that at all. I don't think that same awkwardness is at play with conditions. What I meant was that, sure, you can do this with conditions ("If the price happens to be this, then [these rights/obligations follow]"), but — unfortunately — this boils down to that I believe you can also avoid the awkwardness with warranties. What isn't unfortunate is that this all amounts to basically the same thing. I can state something as a warranty (or a representation, or a banana) and then suggest certain ramifications for its failure — e.g., provide a condition to closing that the warranty (or representation or banana) is true as of the closing. We can state the whole thing within a condition to closing. In terms of avoiding the obligation to close for failure of a certain promise, this works all the same.

And I'm afraid I don't have the stamina to wade into the representation v. warranties business again. The bottom line is that the elements of an action for misrepresentation and an action for breach of warranty are issues that apply only when a contract dispute arises. They have no bearing on how the parties articulate the deal, except where required by statute (for example, as regards waiver of warranties).

And regarding "At Closing the market price of unobtanium will be at least $10,000 per gram," addressing this issue in a representation suggests that it's something that's under the control of the party in question. It would be clearer to phrase it as the risk-allocation mechanism that it is: "If at Closing the market price of unobtanium is less than $10,000 per gram, Acme shall …."

Ken

So, I agree that it's a bit odd that a seller would covenant to do something it cannot do, but, inasmuch as the seller has agreed to do as much, I don't see why we would forgive this bargained-for obligation. Now, if circumstances change to make the the obligation impracticable or its purpose frustrated or otherwise to excuse performance (e.g., under a force majeure clause), then that's a different story. But, to my mind, the doctrine of excuse suggests that where impossible promises are made with eyes wide open (and, again, especially by sophisticated parties), then a party should be held to such promises. I agree that it is an awkward situation and perhaps suggestive that a party did not actually manifest assent.

I guess it depends on what you're defining as "the issue." WIth a condition, whatever rights that followed the satisfaction of the condition would be forfeited by the party's failure to perform the impossible. This may still be an issue for some parties/courts. I think you mean the cognitive dissonance involved with promising to do the impossible as opposed to agreeing that one's rights are conditioned upon the happening of something outside the party's control. But, again, I don't think that conditions are the special mechanism for relieving this awkwardness — indeed, I think the awkwardness is peculiar to covenants and representations. It is awkward to promise to do the impossible. It is awkward to assert as fact the unknown. (I think a slightly separate conversation is the upshot of this "illogicalness" or "awkwardness" — to my mind, the real questions are whether the parties will have a harder time negotiating with the terms so framed, will they understand how to "use" this document as a going concern, will a judge interpret these terms differently than intended by the parties or not enforce the provision altogether.)

I disagree that representations and warranties are at all the same thing. (I am new to this site; so, forgive my unfamiliarity with past discussion on this. I will be sure to read up when I get the chance.) Representations are assertions of fact made with the intention of inducing reliance. Warranties are promises that certain assertions are true and/or will be true (depending on whether the warranty is stated as ongoing or as of a point in time). Perhaps it is awkward to represent a fact about which one has no knowledge or control (e.g., to represent a future price: "At Closing the market price of unobtanium will be at least $10,000 per gram."). I think one may still go ahead and assert the unknown as fact; however, I think it's likely that any attempt to sue on that representation for misrepresentation will be unsuccessful. However, there is nothing awkward about warranting the truth of a fact about which one has no knowledge (e.g., to warrant a future price). This is the essential function of warranties (at least after Ziff-Davis) — to shift the risk of the occurrence or non-occurrence of something. This is not the essential function of representations, which are mere factual assertions upon which others may rely.

Michael

When you use an obligation to address something that isn't under the control of the seller, in theory the buyer would be entitled to seek damages if the obligation isn't performed. In other words, you're penalizing the seller for not doing something even though the seller had no control over it. That doesn't make much sense. If you want to shift risk, it would be clearer for you to do so explicitly.

That issue wouldn't arise if the matter were addressed as a condition. You wouldn't be requiring the seller to do the impossible and control whether X happens. Instead, you'd be saying that you wouldn't want to proceed if X doesn't happen.

I agree that when in doubt, a court will characterize something as an obligation rather than a condition. But generally the language in question relates to matters that are under the control of the party in question.

And yes, you understand correctly what I mean by "recharacterize."

I'm not sure what you mean regarding "warranty. Contracts contain factual assertions. As a matter of convenience, it's simplest in a contract to refer to any such factual assertions as "representations." (If you run a search on this blog for "represents and warrants," you'll find more than you'd ever want to know!) If any such factual assertion is inaccurate, you might be able to bring an action for misrepresentation, an action for breach of warranty, or both. But what kind of remedy you can bring doesn't affect the category of contract language of the factual statement, which is language of representation.

Ken

I suppose it could be phrased as an obligation/covenant. I don't see why this wouldn't be enforceable — the seller is free to promise to do something difficult or seemingly outside its control. Courts will start from the proposition that parties (especially the sophisticated) are free to promise as they like. I suppose perhaps the more ridiculous, the more likely a court is to find the provision unconscionable, but I don't see why this would any more true for a covenant than a condition.

Courts abhor conditions and will often do back flips to characterize a condition as a mere covenant (and not the other way around) — because conditions must be strictly complied with to trigger any subsequent rights/obligations, whereas regular obligations need only be substantially performed to keep the other party on the hook for performance. So, I would be surprised if you were to a find too many courts "recharacterizing" anything as a condition. I'm also a bit confused by the question — by "recharacterize," do you mean whether the court would allow the provision to operate *only* as a condition to closing through the "bringdown" clause and not allow the provision to have any effect as a separate representation or covenant?

I think the appropriate contractual tool you're searching for is a warranty. We can warrant anything will be true or not true for any period of time regardless of a party's ability to control — this is just a means of allocating the risk of its truth/falsity between the parties. This would give the receiving party the breach of warranty/contract claim in addition to any other rights as provided in the contract (e.g., the bringdown provision you mention, through which the content of the warranty would also amount to a condition to closing).

It is not uncommon, in my experience, for hard-nosed financial institutions to argue for warranties or representations not on the basis of what is reasonable or within the knowledge or control of the warrantor, but on the basis that there is a risk out there, perhaps in neither party’s control, someone needs to bear that risk, and it should be the other party. You use the word logical, and I agree that it is illogical to promise something that you can’t control, but it seems to be quite common practice.

However, I don’t have any case citations – sorry!