Obligations binding

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Representations and Warranties Anatomy
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A “typical” Obligations binding clause:

Obligations binding. Its obligations under this Agreement are its legal, valid and binding obligations, enforceable according to their terms (subject to general laws affecting creditors’ rights and equitable principles).

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Representations and warranties generally | Representations | Warranties | Covenants | Acknowledgements | Representations in the ISDA | Warranties in the GMSLA | Representations in the GMRA | Waiver by estoppel | Acknowledgement Common 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 |

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A representation that transgresses the very first rule of representations and warranties, which is that they are meant to be about matters of private, present fact, known to the representor but not the representee, but about which the representee cares a lot, and which might colour its decision to enter the contract in the first place.

Since the representee knows these things, the representor doesn’t, and they’re just facts, it can safely make representations about them to the representee to make it feel better.

But there are no such matters of private fact involved when one represents one’s obligations under a contract are binding: a contract is either valid and binding on a party or it isn’t; this isn’t the sort of thing that one party can conceal from the other. Indeed; whether a contract is valid and binding is not a question of fact at all: it’s a question of law.

It, therefore, requires an opinion, from one qualified to give such an opinion. The person who can attest to these is a special fellow. A boy wizard. A legal eagle. If you want to know whether your agreement is binding, don’t ask the counterparty; ask legal.

The obligations binding representation offends another principle of contractual representation, too: it is a pre-contractual statement as to a legal state of affairs which, by definition, has not yet come about. The “bindingness” of the contract is not a present fact at the time this representation is made. Representations as to the expected state of the world in the future are not generally called “representations”. They are called “promises”.

And yet there is more: if it is, somehow, a post-contractual representation,[1] albeit about a notionally current state of affairs,[2] it presents some kind of existential paradox or state of undecidability that not even Kurt Gödel can let us out of. For if this warranty is wrong, then the contract it lives in, QED, is invalid — that is to say, for all intents and purposes, does not exist, including this warranty. So precisely when you need to rely on it, you find it has vanished like some kind of that Schrödinger’s cat.

See also

References

  1. These things are normally called “warranties”.
  2. I am struggling with this, readers, I am. Deemed current, perhaps?