Capacity

Representations and Warranties Anatomy™ →Go uptown A “typical” Capacity clause: Capacity: You have the capacity and all necessary powers to enter into this agreement and perform your obligations under it. view template Representations and warranties generally | Representations | Warranties | Covenants | Acknowledgements | Representations in the ISDA | Warranties in the GMSLA | Representations in the GMRA | Waiver by estoppel | AcknowledgementCommon representations: Status | Capacity | Authority | No violation | Consents | Obligations binding | Principal | Understanding | Non-reliance | No representation | Unencumbered owner | No default or potential event of default | No litigation | No fiduciary obligation | Representations and warranties Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

A good subject for a representation, a bad one for a warranty.

Whether your counterparty is even constitutionally capable of entering into obligations of the type contemplated by your contract, is a question of its capacity (as to which see also ultra vires). In this day and age, capacity — once a rich source of legal paranoia — is largely a dead letter among commercial enterprises in sensible jurisdictions, but it is still a banana skin for municipal bodies and local governments. Even thirty years on, the words “Orange County” or “Hammersmith and Fulham council” will be enough to get buttocks clenching in your risk department.

Now this presents issues if you will look to your contract to enforce this warranty. For if your client was without the capacity to enter into your contract — to be sure, for commercial enterprises in sensible jurisdictions, a vanishingly remote contingency these days, but it can happen if you ply your trade with local authorities — then its contractual warranty that it had that capacity doesn’t get off the launch pad: You have a chicken-licken and egg problem.

Often combined with the authority representation into a capacity and authority rep. But they’re quite different things, in this commentator’s pedantic view.

See also

• capacity and authority
• Reps and warranties
• ultra vires
• authority