The Nature
Representations and warranties are key elements of commercial
contracts, acting as formal statements of fact that parties count
on while finalising a contractual relationship.
For example, a seller may represent to the buyer that the
subject business has a certain number of active contracts. At the
same time, it could also providing a warranty that these contracts
will remain in force for a specified period after the sale.
Such assertions about past or present facts induce the other
party to enter into the contract, and guarantees ensure that
certain facts hold true at the contract's execution and often
cover future adherence to agreed standards.
These clauses are important from risk allocation perspective and
provide grounds for legal action if these statements are found to
be false or promised standards are not fully met with. Therefore,
drafting these provisions with precision and explicitness is
essential to prevent misunderstandings and legal
