You know that post I did about a recent English opinion on warrants (here)? Well, Glenn West, a partner at Weil whose name appears regularly on this blog, did a blog post about it too (here).
Here’s the bit that caught my attention:
This author’s consistent position on this subject is to continue to bow to current market convention in the U.S. because it’s only worth bucking convention when it matters, and a purported statement of fact denominated as only a warranty in the U.S. will not necessarily shield the maker of that statement from being deemed to have nevertheless made a representation for tort law purposes.
So it appears that Glenn is siding with the establishment … and I’m a lone wolf.
In other words, Glenn is Iceman, and I’m Maverick, bitches!
Perhaps this video captures our dynamic:
Well, actually not.
For one thing, in his understated way, Glenn is a rebel. In a series of law-review articles, Glenn has offered a definitive take on a series of thorny contract issues, cutting through the conventional wisdom to recommend what works best.
And although it might seem as if I’m engaged in window-rattling tower fly-bys, what I do is more sedate than that. It’s entirely geared to avoiding waste and risk by being clear and concise.
Nevertheless, Glenn recommends sticking with represents and warrants, and I recommend change. What explains that?
I think it’s a function of BigLaw transactions. It’s bet-the-farm work. Enough is at stake to make people nervous about novelty and to make my concerns seem trivial. If you’re lucky enough to have your big deal handled by someone like Glenn, they’ll make sure to add to the contract whatever is necessary to preclude a fight over remedies. And BigLaw transactions tend to be one-shot deals, so clients aren’t interested in harvesting efficiencies down the road.
By contrast, I work mostly in the world of commercial transactions. With lower-value, high-volume deals, there’s a greater incentive to capture efficiencies that allow you to get deals done faster, less expensively, and with less risk. In that context, represents and warrants is more of a nuisance than it is in the big-deal world. And because commercial transactions tend to be handled in-house, those doing the work are the ones who stand to benefit from efficiency. So you have both motive and opportunity for change, although even in the world of commercial transactions inertia is a powerful countervailing force.
Two thoughts in closing:
First, to understand the role of represents and warrants in big-deal drafting, I think you have to consider the broader dysfunction. For more on that, see this post.
And second, I wouldn’t be surprised if one of these days a U.S. court is asked to consider the ostensible remedies function of represents and of warrants. If enough is at stake, someone might be willing to take at face value the misinformation on represents and warrants that’s floating around and use it to pick a fight. If that happens, represents and warrants will suddenly start to matter more.
This is Maverick signing off.
One lesson of general applicability in the apparently deathless ‘represents and warrants’ discussion seems to be this: ‘if for a sufficiently important reason, a particular formula must appear in the contract, go ahead and use it, but hedge it round with additional language to assure the formula has only the consequences the parties intend’.
Never “represents and warrants.” Either represents or warrants. I’ve never had an objection when I clarified the differences.
You’re of course welcome to your notions, but they have nothing to do with rational contract language.
Why so irascible? Surely you can meet Mr Mayerson part way: ‘Never “represents and warrants”‘.
And generous interpretation suggests that he ‘clarifies the distinction’ by specifying the consequence of falsity of any fact either word introduces.
If so, he’s only a step away from MSCD’s approach of ‘(1) name of declarant + (2) “states” + (3) fact + (4) consequence of falsity’.
I say this as one who thinks (1) and (2) superfluous and who would combine (3) and (4) into a statement of conditional consequence, as in ‘if any widget delivered is not new, Widgetco shall replace it with a new one promptly upon notice from Acme’.
I say ‘consequence’ rather than ‘remedy’, because sometimes the consequence of falsity isn’t strictly a remedy, as in, ‘If any of the following facts is not true at signing and at closing, Acme will not be not required to close’.