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Representations and warranties: Difference between revisions
Representations and warranties (view source)
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There is a colour of logic if your counterparty is one of the few organisations that are susceptible to [[ultra vires]]. Here, a [[representation]] (as opposed to a [[warranty]]) in this case gives you a leg to stand on if your {{t|contract}} turns out to be void for [[ultra vires]], as that [[misrepresentation]], freed from the usual shackles of [[concurrent liability]] since there is, [[Q.E.D.]] no contract, dangles fruitily before you as an open-and-shut action in [[tort]] for [[negligent misstatement]]. Without it you have a [[warranty]] that — as you have just learned — is part of a contract which has been voided ''[[ab initio]]'' as being outside the powers of your counterparty.<ref>These days, [[ultra vires]] has largely receded from the corporations frameworks in most sensible jurisdictions so only weird counterparties like municipal councils — yes, and why are ''they'' trading tranched [[CDO]]s? — pose a serious risk.</ref> | There is a colour of logic if your counterparty is one of the few organisations that are susceptible to [[ultra vires]]. Here, a [[representation]] (as opposed to a [[warranty]]) in this case gives you a leg to stand on if your {{t|contract}} turns out to be void for [[ultra vires]], as that [[misrepresentation]], freed from the usual shackles of [[concurrent liability]] since there is, [[Q.E.D.]] no contract, dangles fruitily before you as an open-and-shut action in [[tort]] for [[negligent misstatement]]. Without it you have a [[warranty]] that — as you have just learned — is part of a contract which has been voided ''[[ab initio]]'' as being outside the powers of your counterparty.<ref>These days, [[ultra vires]] has largely receded from the corporations frameworks in most sensible jurisdictions so only weird counterparties like municipal councils — yes, and why are ''they'' trading tranched [[CDO]]s? — pose a serious risk.</ref> | ||
So, why have both? | So, why have both? | ||
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But they do a bit more than that. A statement of fact is a bit of scene-setting: “It was a dark and stormy night”. “It was bluebell time in Kent”.<ref>{{cite|Hinz|Berry|1970|2QB|40}} per the great [[Lord Denning]].</ref> It adds colour and richness to the reading experience but, unless it saddles someone with some sort of legal obligation, it has no place in a [[contract]]. To be sure, legal contracts are shot through with all kinds of horrific linguistic tics, but unnecessary editorialising about the weather or the local flora is generally not one of them. So, a simple ''statement'' in a [[contract]] — “the vendor ''states'' that it is duly incorporated in the state of Vermont”, or “the Purchaser ''states'' that the moon is made of blue cheese” — doesn’t achieve ''anything'' of legal significance, ''unless one can infer from it that its utterer accepts responsibility for losses occasioned as a result another party relying on that state of affairs to her detriment''. Generally, one assumes contractual responsibility for the present or historical state of the world by ''warranting'' about it, and as to the future state of the word by ''promising'' it. | But they do a bit more than that. A statement of fact is a bit of scene-setting: “It was a dark and stormy night”. “It was bluebell time in Kent”.<ref>{{cite|Hinz|Berry|1970|2QB|40}} per the great [[Lord Denning]].</ref> It adds colour and richness to the reading experience but, unless it saddles someone with some sort of legal obligation, it has no place in a [[contract]]. To be sure, legal contracts are shot through with all kinds of horrific linguistic tics, but unnecessary editorialising about the weather or the local flora is generally not one of them. So, a simple ''statement'' in a [[contract]] — “the vendor ''states'' that it is duly incorporated in the state of Vermont”, or “the Purchaser ''states'' that the moon is made of blue cheese” — doesn’t achieve ''anything'' of legal significance, ''unless one can infer from it that its utterer accepts responsibility for losses occasioned as a result another party relying on that state of affairs to her detriment''. Generally, one assumes contractual responsibility for the present or historical state of the world by ''warranting'' about it, and as to the future state of the word by ''promising'' it. | ||
==What sort of things does one represent or warrant about?== | |||
'''Facts''': Matters of '''fact''' relating to the internal workings of one’s organisation that are not readily apparent to an outsider looking in, and which have a direct bearing on the enforceability of the {{t|contract}}. For example, that execution of the contract has been properly authorised by any internal procedures — this helps in a little way to give comfort that, if push came to shove, the {{t|contract}} could not be set aside as not having been validly entered. Unless you are trading with a municipal authority such as — cue [[dramatic look gopher]] [[File:Dramatic Chipmunk.png|200px|thumb|right|[[Dramatic look gopher]] yesterday]] — [[Orange County]] or [[Hammersmith and Fulham council]], this is a fanciful, [[chicken-licken]]ish fear in this day and age, but it is hardly an imposition to make this rep, so just go with it. Some matters of fact — such as your counterparty’s internal motivation or intent in entering the contract — are silly things to seek representations or warranties about, because it is impossible to gainsay them. As legal artefacts, they are completely useless. For a great example of such a useless [[warranty]], see Para {{gmslaprov|14(e)}} of the {{gmsla}}. | |||
Matters of '''fact''' relating to the internal workings of one’s organisation that are not readily apparent to an outsider looking in, and which have a direct bearing on the enforceability of the {{t|contract}}. For example, that execution of the contract has been properly authorised by any internal procedures — this helps in a little way to give comfort that, if push came to shove, the {{t|contract}} could not be set aside as not having been validly entered. Unless you are trading with a municipal authority such as — cue [[dramatic look gopher]] [[File:Dramatic Chipmunk.png|200px|thumb|right|[[Dramatic look gopher]] yesterday]] — [[Orange County]] or [[Hammersmith and Fulham council]], this is a fanciful, [[chicken-licken]]ish fear in this day and age, but it is hardly an imposition to make this rep, so just go with it. | |||
'''''Not'' laws''': Generally speaking matters of '''law''' are ''not'' appropriate for reps or warranties — if you want a legal opinion you should, well, get a [[legal opinion]] — but every rule is made to be broken and there are some practical exceptions: [[reps and warranties]] as to one’s own legal capacity to enter into a contract or the transaction contemplated by it are common and not really objectionable: this is technically a matter of law but is uncommonly specific to your own organisation, and is a legal “fact” which you really should know about and your counterparty can’t really be bagged for not knowing. | |||
Generally speaking matters of '''law''' are ''not'' appropriate for reps or warranties — if you want a legal opinion you should, well, get a [[legal opinion]] — but every rule is made to be broken and there are some practical exceptions: [[reps and warranties]] as to one’s own legal capacity to enter into a contract or the transaction contemplated by it are common and not really objectionable: this is technically a matter of law but is uncommonly specific to your own organisation, and is a legal “fact” which you really should know about and your counterparty can’t really be bagged for not knowing. | |||
That said, if you happen to be wrong about it, this only tends to emerge at the point where your counterparty is trying to enforce your contract and finds it cannot. Hence: the difference between a [[representation]] and a [[warranty]]: as a [[warranty]], this is useless, because, [[QED]], the {{tag|contract}} must be enforceable to establish a breach of warranty that the contract is enforceable. It is a [[mobius loop]]. A [[misrepresentation]] that you have the [[capacity]] to enter into the contract sounds in {{tag|tort}}, and thus doesn't rely on the [[contract]] being valid: it is a statement to a [[neighbour]] to whom one owes a [[duty of care]]. | That said, if you happen to be wrong about it, this only tends to emerge at the point where your counterparty is trying to enforce your contract and finds it cannot. Hence: the difference between a [[representation]] and a [[warranty]]: as a [[warranty]], this is useless, because, [[QED]], the {{tag|contract}} must be enforceable to establish a breach of warranty that the contract is enforceable. It is a [[mobius loop]]. A [[misrepresentation]] that you have the [[capacity]] to enter into the contract sounds in {{tag|tort}}, and thus doesn't rely on the [[contract]] being valid: it is a statement to a [[neighbour]] to whom one owes a [[duty of care]]. | ||
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*[[Negligent misstatement]] | *[[Negligent misstatement]] | ||
*[[Chicken Licken]] | *[[Chicken Licken]] | ||
{{ref}} | |||