I’ve written lots about represents and warrants (and representations and warranties), culminating in a series of posts a couple of years ago. See, in reverse chronological order, this post, this post, this post, and this post. With the last of those posts, I felt as if for the time being I’d said pretty much all I could say. And I felt that my position—that using represents and warrants in a contract is pointless and confusing—couldn’t reasonably be disputed.
But there’s no room for standing pat in the marketplace of ideas—you have to be prepared to keep restating your position. What’s prompting me to venture into the fray again is the following account in the third edition of Garner’s Dictionary of Legal Usage, the first paragraph of which draws from Black’s Law Dictionary (Bryan A. Garner ed., 9th ed. 2009):
representations and warranties. Although most contracts have a section so designated, there is widespread doubt about the precise difference between a representation and a warranty. One theory, not far from the truth, is that a representation amounts to a statement that the present situation is so-and-so, while a warranty is a guarantee that it will be so in the future. In fact, though, there are four salient differences between them: (1) a warranty is conclusively presumed to be material (therefore giving rise immediately to a claim for breach), while the burden is on the party claiming breach to show that a representation is material; (2) a warranty must be strictly complied with in every particular, while substantial truth is the only requirement for a representation; (3) a warranty is an essential part of a contract, while a representation is usually only a collateral inducement; and (4) an express warranty must be written on the face of the document, while a representation may be written or oral.
Some have asked this: if the warranty gives so much more protection than a representation, why not simply use warranty alone—without representation? It’s a fair point, perhaps, but here’s the reason for sticking to both: some parties to a contract don’t want merely a guarantee that so-and-so will be so in the future; they also want an eye-to-eye statement (representation) that the thing is so now. If it later turns out not to have been so when the representation was made, the the party claiming breach can complain of a lie. (See lie.) If only a warranty were in place, the breaching party could simply say, “I’ll make good on your losses—as I always said I would—but I never told you that such-and such was the case.” Hence representations and warranties.
I’m not sure what to make of this analysis, stripped as it is of all context. I’m inclined to take issue with components of it, not to mention the tone of the thing. (For example, the reference to “truth.”)
But more to the point, as guidance for contract drafters, it’s counterproductive. It fails to consider what, if anything, drafters think they’re doing when they use represents and warrants. It fails to offer any support for the supposed implications of the words representation and warranty. (That’s understandable—there is none.) And it ignores the fact that rather than engaging in magic-wordery and expecting the reader to discern obscure doctrinal nuances of dubious relevance, drafters can state clearly whatever remedies regime they desire.
For more on this, consult the blog posts I link to above.
7 thoughts on “Revisiting “Represents and Warrants”: Bryan Garner’s View”
Wow, that is gobsmackingly wierd. Have the US courts really made any of those distinctions? I don’t think any of that is true under English law. I thought (3) might be true, then the word “essential” stuck in my throat.
If that is an accurate portrayal of the differences in US law between representation and warranty, I now understand why you want to sidestep them.
Mark: Now that we’re in the comments, I permit myself to say that I think it’s batshit crazy. That’s what happens when you cobble together distinctions in a vacuum of your own making. Ken
Ken, As I read the MSCD analysis, a key step is in 12.292, “it doesn’t follow that the meaning of representation must be linked to the elements of an action for misrepresentation.” True enough. . . there’s no reason the two words MUST be linked. It seems to me, however, the question is whether courts DO link them.
Here’s a case that seems to do precisely that and, in doing so, reaches a result for a clause containing “represents and warrants” that appears to be differ than the result that would have been reached if the clause had contained only “represents.” Shambaugh v. Lindsay, 445 N.E.2d 124 (Ind. App. 1983). The underlying deal was a stock purchase agreement, and the buyer asserted claims of fraud and breach of warranty. The trial court analyzed the clause under tort law and ruled in favor of the seller because the buyer did not prove reliance on the statement of fact. The buyer appealed, conceding that the trial court applied the correct law for the fraud claim, but alleging that it applied the wrong law to the breach of warranty claim. The Court of Appeals agreed with the buyer. “Transplanting tort principles into contract law seems analytically unsound.” (quoting Ainger v. Michigan General Corp., 476 F.Supp. 1209 (S.D.N.Y. 1979)). In my mind, this case says that “represents” gives rise to an action in tort but “warrants” gives rise to an action for breach of contract. At least in Indiana.
Mike: I don’t see how you reach the conclusion you do.
For a case to stand for the proposition that represents and warrants are magic words, it would have to hold that because the other party didn’t say represents, a party can’t bring in action for misrepresentation, or that because the other party didn’t say warrants, a party can’t bring an action for breach of warranty.
In other words, it would have to follow the logic of the 1625 English case Chandelor v. Lopus. I have yet to find any modern U.S. case that does. More specifically, the Indiana case you cite doesn’t appear to.
On the other hand, plenty of cases show that courts don’t treat represents and warrants as magic words. And the U.C.C. says that for something to be a warranty, you don’t have to call it a warranty in the contract.
That doesn’t negate you point that a court could conceivably treat represents and warrants as magic words. To counteract that, I could recommend that you use a neutral word like asserts, but I’m not optimistic about teaching old and conservative dogs new tricks.
So instead, in one of the blog posts I link to above I propose a provision that neutralizes the words by saying that the verb you use when stating facts doesn’t have any remedies implications. But in the U.S., at least, that provision wouldn’t be necessary.
Okay, that I read 12.300 of MSCD again, I think I know what you’re going to say. . . the case says that “represents and warrants” gives rise to both causes of action, but it doesn’t address the result if only “represents” had been used. Your point in 12.300 is that “represents” should also work just as well to give rise to both causes of action (in the right circumstances).