Some Terminology Relating to Representations

Don’t worry—I’m not going to get on my representations and warranties hobby-horse again.

Instead, I just want to point out some terms that are inappropriately used in relation to representations.

As I say in MSCD 3.113, one breaches an obligation, but not a representation. Instead, a representation, like any statement of fact, is either accurate or inaccurate. If I tell you that it’s Monday but it’s in fact Tuesday, I haven’t “breached” anything. Instead, I’ve made an inaccurate statement.

This distinction is worth pointing out for its own sake, but it might also help drafters avoid a further glitch, namely inappropriately lumping representations with obligations. It’s commonplace for contracts to provide for the possibility of cure of not only breached obligations but also “breached” representations. But a party cannot subsequently make accurate an inaccurate representation. One could conceivably arrange for an inaccurate representation to be accurate if it were made again at some point in the future, but even that would be awkward if the representation contained a “reference point”—a point in time as of which the representation spoke with respect to the facts asserted. (For example, “as of the date of this agreement.”)

In the same vein, a representation is either accurate or inaccurate—it cannot become inaccurate. Making this mistake would interfere with the logic underpinning the provision, commonplace in M&A contracts, allowing for termination if the bringdown condition cannot be satisfied.

This is a topic I address at slightly greater length in my article on the structure of M&A contracts. I haven’t yet decided how I’ll be publishing it.

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.