More Underwhelming English Caselaw on “Warrants”

Via this IP Draughts post, we learn that another English court has held that if a set of statements of fact is introduced by warrants, those statements of fact do not also constitute representations giving rise to a claim for damages under the Misrepresentation Act 1967. Mark notes that this opinion is of limited interest, as it involves only a hearing of an application for summary judgment, before a deputy judge. But it’s still worth noting, as it involves one of my hot-button issues.

The case in question is  Idemitsu Kosan Co Ltd v Sumitomo Corporation [2016] EWHC 1909 (Comm) (27 July 2016). This will give you a flavor:

The words of the warranting provision (clause 5) are words of warranty not representation. There is a legal distinction between the two and (subject to a point made about a later reference to representations, as to which see below) there is no reason to extend the words beyond their natural meaning. In order to make the relevant material a representation one has to find something in the SPA which is capable of doing that. It is not enough that the subject matter of the warranty is capable of being a representation. One has to find out why those words are there. One finds that in clause 5; and what one finds is words of warranty, not words of representation.

The judge compared the 2012 High Court opinion by Justice Mann in Sycamore Bidco Ltd. v. Breslin with the 2009 High Court opinion by Justice Arnold in Invertec Ltd v De Mol Holding BV. Offering no relevant analysis, he sided with Justice Mann. Do I care? No. Here’s what I say in my, ahem, definitive article on this topic, Eliminating the Phrase Represents and Warrants from Contracts (here): “Justice Mann’s perfunctory analysis in Sycamore Bidco provides no reason to consign Invertec to oblivion.”

But the holding in Idemitsu Kosan is consistent with the conventional wisdom among English practitioners, who unfailingly quail at the prospect of using represents to introduce statements on fact, on the grounds that doing so would make available the remedy of rescission.

It follows that grousing about English caselaw does no good; instead, this is a drafting problem. The drafters of the contract at issue in Idemitsu Kosan failed. They could have expressed the intended meaning clearly, but instead the parties ended up in litigation. FAILURE.

To avoid this sort of fight, take two steps:

First, purge the one or more verbs used to introduce statements of fact of any implications for remedies. One way to do that is to include the following: The verb [or verbs] used to introduce a statement of fact in this agreement does not affect the remedies available for inaccuracy of that statement of fact. And if you can handle the extreme clarity and novelty, follow me and some of my consulting clients in using states instead of either or both of represents and warrants.

And second, if you want the remedies available under the contract to differ from whatever default remedies might be available under law, then say exactly what remedies you want! Electing instead to use misbegotten code is reckless and pathetic.

As Mark notes in his post, this is sure to come up at the 8 November panel discussion hosted by UCL Faculty of Laws (go here for information). Unless we switch to a bigger venue, it’s likely to be sold out, if it isn’t already.

(By the way, the U.S. caselaw bears no resemblance to the English caselaw. For more about that, see the article I link to above.)

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.