Additional representations: Overview, definition, and example
What are additional representations?
Additional representations refer to statements or assurances made by one party in a contract to provide further clarity or assurance regarding certain facts, conditions, or circumstances that are not already covered in the core representations of the agreement. These additional representations often address specific details that may be relevant to the parties involved, ensuring that all material aspects of the transaction or relationship are disclosed and acknowledged. They serve to support the main representations in the contract by adding further context or addressing issues that may have been overlooked in the initial terms.
In legal and business agreements, additional representations may be used to verify facts such as the condition of assets, compliance with laws, the accuracy of financial statements, or the absence of liabilities, among others.
Why are additional representations important?
Additional representations are important because they provide added protection to the parties involved in an agreement, reducing the risk of unforeseen issues or disputes. By ensuring that all relevant facts and conditions are disclosed, these representations help clarify expectations and mitigate the potential for misunderstandings or legal challenges after the contract is executed.
For businesses, including additional representations can help safeguard against liability, ensure full transparency, and confirm the accuracy of information provided. For individuals or investors, these representations provide additional confidence that they are making decisions based on a complete understanding of the circumstances.
Understanding additional representations through an example
Imagine a company that is acquiring another business. In the acquisition agreement, the seller may make representations regarding the business's financial health, assets, and liabilities. However, to provide further assurance to the buyer, additional representations might be included to confirm that all intellectual property rights are in order, there are no pending legal claims, and that all contracts with employees and third parties are valid. These additional representations give the buyer greater confidence in the accuracy and integrity of the transaction.
In another example, when a person rents a commercial property, the lease agreement may include a representation from the landlord that the property complies with all local zoning laws. An additional representation may be included stating that there are no pending government violations or fines related to the property. This helps the tenant avoid any legal issues arising from regulatory compliance during the lease term.
Example of an additional representations clause
Here’s how an additional representations clause might appear in a contract:
"In addition to the representations and warranties set forth in Section [X] of this Agreement, the Seller further represents and warrants that: (i) The Seller has not received any written notices of violation from any governmental authority relating to the property; (ii) All intellectual property assets related to the business are fully owned by the Seller, free of any liens or claims; and (iii) There are no pending or threatened lawsuits or claims that could materially affect the business or its assets."
Conclusion
Additional representations are a vital part of many contracts, offering further clarity and protection by confirming specific facts or conditions that might not be fully addressed in the initial representations. They help provide transparency, reduce risk, and ensure that all relevant issues are adequately covered, protecting both parties involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.