Representation

A representation is a statement of present or historical fact made by one person to another outside the bounds of a contract that induces that other person to enter a contract. By its nature, a representation is therefore not a term of the contract itself — it cannot be; it was made before the contract came about; it is an egg to the contract’s chicken — although that won’t stop Legal riddling your contract with representations and, usually, co-branding them as warranties for good measure. A false representation may entitle an innocent to claim under the Misrepresentation Act 1967 and rescind its contract, or claim damages for negligent misstatement in tort.

Dear old Criswell

Being founded on the tortious action on negligent misstatement, one of the ingredients of an actionable misrepresentation is that the representer somehow fell short of her duty of care: the simple fact that the representation was false might not be not enough if she can’t cannot reasonably have known it was false. This feels a more significant distinction than it is: tort governs situations where the parties, being randoms, have not had the opportunity to document their duties to one another, so the law steps in to help. Where they have, through the medium of contract, the law says, “you don’t need my clever appeals to the judgment of prudent people on public transport in south London to work out how you must treat each other, because you have worked it out for yourselves.”

Where the parties have written down their respective duties, but they still appeal to a tortious standard — which is what they are doing by writing “representations” into a contract — they are admitting to confusion between the laws of tort and contract. Here the fellow on the Clapham omnibus would surely say that the abstract duty of care maps exactly on to what the parties have voluntarily agreed. Why would it be any different? To be “negligent” under a contract is surely to breach it; no more and no less.

What representations are not

• Law: Representations are generally not made about the law or legal status — those things are called “legal opinions” and you’ll require august counsel to give you one of those and the boredom threshold of Job if you aspire to reading it.
  
• The Future: Representations are generally also made about things which have already happened — “known knowns”, in the Rumsfeldian argot — and not states of affaiirs expected to come about in the future. A factual assertion about a future state of affairs is better known as a promise, and you will need it to be a part of your contract, not a prelude to it, if you want to hold your counterparty to it in some tribunal down the line.

Gosh all this talk of the future — that place where, after all, you and I are going to spend the rest of our lives — makes me think of dear old Criswell.

Greetings, my friends

Representations by agent on principal’s behalf

You might occasionally hear, from an investment manager, a protest when you ask it to make representations on behalf of its principal.

“But I cannot,” she might say, “for I do not know if this is true unless the principal has told me it is true. I cannot assume personal liability for my principal’s obligations. I am but an agent.”

You must answer this firmly, along the following lines:

Now, look. No-one is asking you to assume personal liability for your principal’s obligations. We are asking the principal to do that. It is the principal’s responsibility under the contract. Ordinarily, of course, we would ask the principal directly, but it didn’t show up, and sent you here on its behalf instead. So, we are asking you to communicate these representations to us, on your principal’s behalf.

Now, you might say you don’t know whether these representations are true, or that you are not sure whether you are authorised to make them on your client’s behalf. But think twice before admitting that, because, really, you should have asked or, better still, explained to your client that a condition of signing master trading agreements is that you will have to make uncontroversial representations about your own capacity, authority, competence and sanity.

If you are still not comfortable proceeding, the answer is not to do without the representations: it is to do without the master trading agreement.

What’s the diff...

Representation: A representation is a pre-contractual statement of a present fact, the failure of which entitles an innocent party to rescind a contract altogether (i.e. to put itself in the position it would have been had it never undertaken the ghastly affair in the first place)

Warranty: A warranty is a contractual statement of the truth of a present fact, the failure of falsehood entitles the innocent party to sue for damages for breach of contract (to compensate it for the value of the contract had the statement been correct). It also has a specific meaning as a guarantee of merchantability in the context of a “Manufacturer's Warranty”.

This is why so often you see that most laborious of constructions: “representations and warranties” — the combination giving the wronged party the maximum possible range of remedies.

Promise: This, in Horton Hatches the Egg terms, is what you meant when you said, and what you said when you meant. A promise, if offered, accepted and accompanied by consideration, is your legally binding obligation under a contract.

Undertaking: An undertaking, in a contractual context, is really no different from a promise (though a solicitor’s undertaking is a quite different thing). You might characterise it as a specific promise to ensure that someone else does something (rather than the person making the promise itself), but it isn’t generally used that way.

Covenant: A covenant, strictly speaking, is a promise executed by deed, though usage has long since slipped away from that except for transactions involving the conveyance of land.

In any other context, therefore, covenants and undertakings are nothing more than fancy words for promises, and any lover of plain English should therefore seek them out and, with extreme prejudice, relieve them of their command.

Compare

• warranty
• negligent misstatement

See also

• Representations and warranties
• Covenant
• Undertaking
• or you could cut to the chase and go straight to Promise