Back To The Basics | Representations And Warranties: Impact Assessment

Representations and warranties are used synonymously in corporate transactions and are often inter-linked in drafting and remedies as well. However, there are differences between the two. In this note, we look at some of the fundamentals that should be borne and considered in mind about representations and warranties, while making a deal.

• Representations are considered fundamental to a transaction while warranties are incidental or collateral to a transaction. Therefore, remedies under law for the two are different as well – the former allows for repudiation while the latter allows for monetary relief.
• Indemnity protection for an investor against breach of representations and warranties by the investee/existing shareholders/promoters is practically a trade-off between the two sides – avoid easy repudiation of the deal set off against indemnity assurance instead of a more protracted damages claim.