Do We Care About Default Remedies?

You might recall that one of the rationales for use of the phrase represents and warrants is that it allows you to specify what remedies are available, namely an action under the contract for breach of warranty, a tort action for misrepresentation, or both.

In an as-yet-unpublished article, I demonstrate that using represents or warrants or both doesn’t make sense. I go on to say that if you’re worried about remedies, you should address the issue directly.

But here’s what I think about electing among default remedies. (To avoid confusion, by “default remedies” I mean, as Vance notes in his comment, not the remedies for default, which could be contractual or extra-contractual, but the remedies the law would provide in the absence of anything to the contrary in the contract.)

Where a cause of action would otherwise not be available, you can’t make it available just by saying so. In effect, you’re limited to precluding one or other cause of action. My question is, does anyone really think that’s a worthwhile thing to do? When you’re putting together a commercial transaction, your focus in on the deal. Why spend time trying to figure out exactly what might go wrong and whether you want to prevent the other side from bringing one or other cause of action against you? Wouldn’t that involve too much speculation and wallowing in elements-of-a-claim minutiae?

In particular, if you’re really worried about remedies, you’d likely construct your own, instead of worrying about how breach-of-warranty or misrepresentation claims might play out. You’d specify that indemnification is the exclusive remedy. Or you’d provide for liquidated damages.

Any thoughts? (I suggest that you not use this as an opportunity to revisit represents and warrants. In due course you’ll be able to read my article about that.)

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.