My article Eliminating the Phrase Represents and Warrants from Contracts is now available. It’s in the latest issue of Transactions: The Tennessee Journal of Business Law. Go here for a PDF.
This article shows that it’s pointless and confusing to use represents or warrants in a contract to introduce statements of fact. It recommends that instead you use states to introduce statements of fact, and that if you want to exclude particular remedies or make sure that they’re available, do so explicitly instead of relying on inscrutable code. It first considers how drafters use represents and warrants in the United States, explanations offered for their significance, and how those explanations fall short. It then does the same for use of represents and warrants in England. It then offers an alternative explanation for prevalence of the phrase represents and warrants and recommends alternative ways to address issues ostensibly underlying use of represents and warrants. It then considers use of warrants in the context of sale of goods. It closes by considering some broader implications.
This article presents at its starkest the disparity between traditional contract language and what I think makes sense. Some other topics can be a bit subtle (for example, use and abuse of shall), so the full extent of the disparity might not be readily apparent. And still other topics involve issues that feature in contracts only sporadically (for example, efforts provisions), so you can avoid focusing on the disparity. By contrast, represents and warrants has somehow become the label for an essential component of most contracts, so the implications of my take are more in-your-face. Warning: some brains might implode.
In this article I do my best to be methodical, comprehensive, and analytical. I leave it to others to determine what level of scholarship that, um, represents, but I can tell you that rigorous microscale analysis of contract language is exceedingly rare. That void plays a part in the dysfunction of traditional contract language. I also tried to make this article readable. I hope I succeeded.
This article looks at usage in both the United States and England because nowadays I try to consider the international implications of usages I study.
I’ve previously written plenty about represents and warrants, so why write this article? Because my previous scribblings weren’t comprehensive enough. This one is. Although you can always find me in the marketplace of ideas, ready to debate pretty much anything, as far as I’m concerned I’ve now put a stake through the heart of represents and warrants.
By the way, if you’re inclined to ignore this article because the Tennessee Journal of Business Law isn’t exalted enough for you, you might find this post of interest.
(See today’s related posts “‘Represents and Warrants’ Is a Zombie Usage” (here) and “The Rise of ‘States'” (here).
8 thoughts on “My New Article on “Represents and Warrants””
1/ The article is a masterpiece, and the closing manifesto in favor of clear, modern drafting (alias MSCD style) is eloquent and strong.
2/ But the article strikes me as an elephant gun fired at a gnat. The fact that a drafter can neutralize the ‘represents and warrants’ issue with a single sentence makes purging every occurrence of ‘represents’, ‘warrants’, or both, a minor matter of aesthetics.
3/ The falsity of a statement of fact in a contract either triggers a consequence or it doesn’t. If it doesn’t, the statement is literally of no consequence. If the falsity of a statement triggers an articulable consequence, who the declarant is doesn’t matter.
4/ To illustrate, take these two statements:
(a) The Vendor states that the Widgets conveyed are all in A-1 condition. (The Vendor is the declarant.)
(b) The Widgets conveyed are all in A-1 condition. (No stated declarant.)
5/ So what’s the consequence if a non-A-1 widget turns up among the widgets conveyed? Whatever the consequence is, it can be phrased so that it occurs regardless of who the declarant is. For example, ‘The Vendor shall, promptly upon Notice from the Vendee, replace any Widget not in A-1 condition with a Widget in A-1 condition’.
6/ Going a step further, why not omit statements of fact altogether and just use langauge of obligation?
(a) ”The Vendor shall, promptly upon Notice from the Vendee, replace any Widget not in A-1 condition with a Widget in A-1 condition’.
(b) ‘If one or more of the following statements of fact is not true at Closing, the Buyer will not be not required to close’.
7/ Ken, you’ve said before that it’s impractical for a drafter to state a consequence for falsity immediately after every statement of fact. I agree, but that’s not a reason for assigning a declarant to every statement of fact or for using statements at all, rather than obligations.
8/ Kevin Heaney in Billings gives a sufficient tactical reason, but not a drafting reason, for using ‘states’: the other side is willing to make broader statements of fact under the ‘states’ flag than under the ‘represents and warrants’ flag.
9/ I’m always astonished and dismayed when I disagree with you, Ken, because it usually precedes my ingesting a healthy ration of crow. *Looking for the catsup.* Wonderful article. Sorry for the reservations.
For now, I’ll wait to see if someone else enters the fray. Any discussion between you and me risks being a bit of a sideshow.
May I throw some more carrots into the sideshow soup?
I understand your excellent R&W article to say in pertinent part (paraphrased):
1/ Don’t use R&W to introduce statements of fact because (a) R&W is fusty and unclear, and (b) R&W doesn’t create remedies or connect to ‘background’ legal remedies in any reliable way.
2/ Do use ‘states’ in place of R&W because ‘states’ (a) is clear and unfusty and (b) pairs up nicely with the noun ‘statement’ and so ties reliably into ‘background’ legal remedies for misstatements of fact.
3/ Beyond that, ‘If remedies are an issue, address remedies directly’.
My reaction is:
1/ If the drafting goal is to let Acme recover against Widgetco for the falsity of one or more facts, don’t take the long way round the barn, be direct, maybe like this:
‘Widgetco shall be liable to Acme for the damages Acme suffers by reason of the inaccuracy of one or more of [the relevant statements of fact]’.
That’s neither cumbersome nor repetitious. It explicitly invokes the background law of damages but without inserting the whole of it into the contract.
2/ That direct approach eliminates any need for either a declarant or any declaring verb (whether affirms, asserts, attests, avers, declares, promises, says, states, represents, or warrants), since falsity of any of the relevant facts, without more, makes Widgetco expressly liable for Acme’s resulting damages.
3/ The lesson you draw from your truly impressive takedown of R&W is less radical than the one I draw. The one I draw is this:
Drafters should toss the whole circuitous approach of ‘declarant + declaring verb + statement of fact + silent reliance on background law’ onto the ash heap of drafting history in favour of directly answering the question, ‘What happens if one or more facts on the list of important facts aren’t true?’
3/4/5/6 – Yes, of course you’re right. However, that’s definitely not what most people actually write in contracts they send to me. They say things like “The Accountants shall deliver the report within 30 days” when the Accountants are not a party to the contract. No consequence, no explicit description of whose obligation it might be. If that sentence was followed with something meaningful, I wouldn’t really care.
There are many different ways to make the words work. While there are matters of style, I prefer to start with “Does the sentence do what it’s supposed to?”
As for the broader question in 6/7, it seems to me that the answer is that when you have specific remedies such as replacement of the non A-1 Widget, then an obligation makes sense. When the remedy is just damages, then would you state that in each obligation? That would seem both tedious and repetitive, while “states” would collect all those generic-remedy statements of fact into one group with common remedies.
I disagree with point 6, which underlies most of your thoughts, because it would require me to encode 1000 years of common law and equitable developments on remedies into an agreement that I’d like to be as short as possible.
The situation you describe in 5 and 6 is not normal. Usually, there are additional remedies, such as damages. Even the notion of “damages” is simply a place-holder for a hugely complex thing. If I can instead say “Vendor states” to invoke whatever remedies the law provides for misrepresentation, that is no more objectionable for failing to state the consequences than to say that the Vendor will be liable for damages if the representation is untrue.
The only way I could see of making 6(a) shorter would thus be “If any Widget is not in A-1 condition, the Vendor will be subject to all the remedies available at law, equity, or statute.” I have zero desire to put that into my agreements. Worse still, the same logic would apply to language of obligation. Don’;t say “Vendor shall”; instead say “If Vendor fails to perform the services in a professional manner, the Vendor will be subject to all the remedies available at law, equity or statute.” That’s really unappetizing.
Your response ought to be that I’ve taken your approach to illogical extremes. Maybe so, but that is because I don’t see any principle limiting to the scenarios where you would employ it.
So, my starting point in this matter is that Ken is absolutely right that the verb you use to introduce a statement of fact in a contract has (in the US) or should have (in the UK) no bearing on the remedy available for the falsity of that statement. Therefore, some substitute for “represents and warrants” is, um, warranted.
I am, though, disturbed by the report of Kevin Heaney that a consequence of using “states” is that parties gloss over these statements, thinking they are of no consequence. People don’t go around making statements of facts in contracts for no reason. A statement of fact in a contract should be a) germane to the contract and b) consequential for the legal relationship of the parties. If using the term “states” leads people to think that the statements are inconsequential, then something is wrong. A party making a statement of fact should understand that its falsity carries consequences.
Moreover, who the declarant is does matter, because it ultimately affects the available remedies. If you have set out a detailed list of consequences if statement A is incorrect, then so much the better; but not every statement of fact comes with such a list. Warranties of performance sometimes do and sometimes don’t, and representations about existing conditions sometimes do and sometimes don’t. Parties are, after all, allowed to rely on background legal principles. You specify consequences when they’re at the top of your worry list, but that doesn’t mean you’re not entitled to demand satisfaction of all the others.
Oftentimes the statement of an obligation (the Widgets must conform to the Specifications, or Seller shall not deliver Widgets that do not conform to the Specifications, or Provider shall perform the Services sin a workmanlike manner and in compliance with all applicable laws and the following industry standards) is sufficient to establish grounds for a remedy in warranty, but not everything you want a party to be liable for can be so easily encapsulated. You’re not going to set out detailed rules for what happens if a party is not duly incorporated or qualified to do business in some jurisdiction, but you want that party to be liable if you suffer losses because it wasn’t. So statement of facts are inevitable (and by the way, the statement “the widgets are in good–or A-1–condition” is not a statement of fact unless you’ve defined what “good” or “A-1” means).
I have said on several occasions that I think the word “states” is a bit flatfooted. Now that we have Mr. Heaney’s report, I have more than a sense of esthetics to support my contention. I think the verb should convey the impression that the person making the statement stands behind it and will be liable in some fashion or another if it’s incorrect. I have been using the term “affirms” for this purpose, since it doesn’t carry the legal baggage of “represents” or “warrants,” but does indicate that the speaker knows that the statement it introduces has consequences. There are undoubtedly other words that have similar impact, and while Ken calls such words rhetorical flourish, they are not pointlessly rhetorical.
Bottom line, “represents and warrants” needs to go, but what replaces it is not chiseled in stone, so long as it avoids the “magic words” fallacy.
Thanks. Yes, there’s plenty of room for useful discussion regarding alternatives to represents and warrants. I’ll encourage Kevin to chime in, but perhaps what he means is not that people assume statements of fact are of no consequence, but rather that those statements become less threatening once freed of legalistic baggage.
I thought I should weigh in because there are a few comments in this thread that
appear to be precipitated by the experience I shared with Ken on my usage of states. AWrightCrukeMPhil commented that I provided a sufficient tactical reason, but not a drafting reason, for using states (i.e., the tactical reason being that the other party seems more amenable to make broader statements of fact under than under the represents and warrants flag). I did not delve into the drafting reason for my use of states because Ken points out a host of drafting reasons, which I believe are compelling. With respect to the “tactical” reason for using states, both AWrightCrukeMPhil and Mr. Koven comment on that notion. One the one hand, AWrightCrukeMPhil seemed to appreciate the “tactical” reason/result for using states. On the other hand Mr. Koven expressed some concern over whether states carried sufficient esthetics to express the true import of the statements of fact (i.e., use the word affirms instead) and that by using the “flatfooted” word states the other side may believe the statements of fact become inconsequential (or less consequential that they actually are). My intent in using states does not fall into either of those descriptions. I did not intend to imply that others might unwittingly believe statements of fact become inconsequential due to the use of states. Actually, my intent
in using states is to have the opposite impact – if a dispute arises, the provisions are clear and
unassailable and everyone understood exactly what they were promising to one another. With the clear usage and a clear tie to the remedies provision, it is hard to fathom that the other party would somehow believe the statements of fact are inconsequential (or significantly so). The words “represent and warrant” seem to cause consternation because of their very nature as terms of art (difficult to understand and interpret, legal baggage, etc., as demonstrated in Ken’s article). States strikes me as a word other party understands and by clearly weaving that into the remedies provision, they presumably have a much better understanding exactly of what the ramifications will be and how it all ties together. For whatever reason, in my somewhat limited experience with the use of states, the negotiation of the statements of facts seem to have much less back and forth that when I use represents and warrants. I hope that is because using states makes the section clearer and less threatening/intimidating and therefore broader statements of fact become acceptable because the other party not better understands the provision (i.e., not understood as being inconsequential, but instead now just clearly understood). On the other hand, if the other side believes the statements of fact are inconsequential, which I hope would not be the case; I am not sure what I can/should do to try to ascertain whether that is the case. If the other party believes the statements are inconsequential, it would seem as if they
would strike the entire provision (i.e., why include a meaningless provision?), at which point I would then explain why it needs to stay in place. W/r/t using affirms as opposed to states, I do like affirms (generally for the same reasons I like states), but am sticking with states. If the other party somehow believed the statements of fact were inconsequential due to using states, I do not
necessarily think using affirms elevates the statements of fact from inconsequential to consequential in the other party’s mind (assuming I could read the other party’s mind). As an aside, I have not researched the usage, but affirms could be a term of art with some legal baggage itself. Ultimately, I am not completely sure why other parties generally seem to be refraining from marking up the statements of fact when I use states as opposed to represents and warrants.I hope it is for the reasons discussed above and that the optics of states are less threatening and less misunderstood, as opposed to some belief they are somehow inconsequential. I do not mean to be facetious, but it would seem odd to inquire with the other party:
“Hey, just curious as to why you didn’t mark up that section, in my mind states has the same implications as represents and warrants, why don’t you take another run at a mark up with that in mind – do you think the statements of fact are inconsequential or do you just not understand/appreciate the words on the document.”
In any event, it really would not have occurred for me to do so because in my mind the word states is clear, unambiguous and easy to understand. Finally, if the other party really thinks the use of states makes the statements of fact inconsequential and I am not aware that is what the other party indeed believes, I do not think there is much I can do about that.