On the 11th day of Christmas, my client gave to me, 11 reps and warranties… (Mel’s Remix)
In honor of the holidays, I’d like to share a few tips with you to make sure you go into the new year with new knowledge. Instead of the 12 Days of Christmas, I present to you — The 12 Days of Contracts! Yes, I’m a legal nerd!
In these 12 days, I will share some contract basics, terminology, and other info so you can be more informed on what a proper contract needs to contain to make it valid and enforceable.
Prior 12 Days Posts:
IF YOU MISSED IT, SEE DAY 11 (REPRESENTATIONS) HERE | IF YOU MISSED IT, SEE DAY 10 (INDEMNIFICATION) HERE | IF YOU MISSED IT, SEE DAY 9 (TERMINATION) HERE | IF YOU MISSED IT, SEE DAY 8 (DELIVERY) HERE | IF YOU MISSED IT, SEE DAY 7 (SCOPE) HERE | IF YOU MISSED IT, SEE DAY 6 (RIGHTS) HERE | IF YOU MISSED IT, SEE DAY 5 (FEES) HERE | IF YOU MISSED IT, SEE DAY 4 (TERRITORY) HERE | IF YOU MISSED IT, SEE DAY 3 (TERM) HERE | IF YOU MISSED IT, SEE DAY 2 (ELEMENTS) HERE | IF YOU MISSED IT, SEE DAY 1 (PARTIES) HERE
Representations and warranties are statements of fact in a contract. It gives the parties reassurance that the statements made are true.Melanie Rodriguez aka The Entertainment Esquire
Representations + Warranties (aka reps and warranties)
Try saying this 5 times fast! This is another often overlooked and misunderstood term in a contract and usually part of the boilerplate terms. According to Black’s Law Dictionary, a representation in a contract is a “statement made by one of two contracting parties to the other, before or at the time of making the contract, in regard to some fact, circumstance, or state of facts pertinent to the contract, which is influential in bringing about the agreement.”
Plain language? It’s a statement of fact. It gives the parties reassurance that the statements are true. These statements typically relate to an underlying important assumption in the contract. A warranty is a guarantee either to the quality or condition of the transaction, subject matter, product, in the contract. It is essentially a guarantee. In the context of a contract, representations and warranties are “binding statements and promises made from one party to the other party and concerning the status of a party or its business.” – The Essential Guide to Entertainment Law: Dealmaking (Highly recommend this book, if interested, see my affiliate link here: https://amzn.to/3pzONsU)
For example, in a entertainment contract, one party or both parties may make a “representation” that the owner has full copyright ownership and/or the work has not been infringed from anyone else. This is important, right? If a party comes to find later that the work is actually someone else’s, this can open liability to be sued to all parties. No one wants that. So at minimum, the party or both parties agrees of this fact that one party indemnifies the other from this potential circumstance. Other common representations is that the parties have the ability to enter a contract and there’s no existing litigation or liens involving the work.
As we’ve discussed in previous days for other concepts, representations can be one sided (unilateral) or mutual (both parties). Also, the representations made by one party need not be made for the other because each party has its set of obligations. It depends on what the contract covers to determine if certain representations make sense for that party.
Making accurate representations is crucial! If a representation made is found out not to be exaggerated, a misrepresentation, or a flat out lie, it could cause a breach, and worst case, cancellation of the contract.
Here’s a caveat: It’s very hard to warrant for future representations because one cannot predict what might happen. Thus, reps and warranties usually apply to past performance that can be treated as verifiable fact.
Reps and warranties clauses are usually collapsed together in the same paragraph in a contract. So now that you know what these are, you can be on the lookout for these in your contract. If it’s not included, this is a red flag!
If reps and warranties are not included in a contract, that’s a red flag!
Questions to ask:
- 1) What representations are being made? There should be a specific section or clause in the contract that addresses this. If it’s not included, this is a red flag! If your contract is drafted by an attorney, it should most definitely be in there. You might also see the phrase “represents and warrants” as well.
- 2) Which party is making the representation? Sometimes representations are one-sided in which only one party is making the representations. Depending on the context of the contract, you may need to have mutual representations, so that all parties are protected.
- 3) Have all representations been included? Different types of contracts have specific types of representations that need to be made. It depends on what the subject of the contract is. A good question to frame this concept is asking, “does something need to be guaranteed in this contract?” Whether it be related to a party’s performance, the work, the license, etc., making sure any guarantee is included in writing is necessary.
- 4) Are any representations true or false? Remember, representations are facts. You should be able to verify these to be true at the time of signing. Representations of any facts of the future are hard to make and should be avoided. If you find that any information represented is false, make sure that you bring this to the attention of the other party, preferably before signing. Making false representations may cause legal liability and cancellation of the contract.
If you have any questions related to a contract you signed or need guidance for constructing your contracts, please contact me.
*Disclaimer: This post is for informational purposes only and does not constitute legal advice. An attorney client relationship is not formed until there is a signed fee agreement*