Representations and warranties of each party: Overview, definition, and example
What are representations and warranties of each party?
Representations and warranties of each party are mutual statements made in a contract where both sides confirm key facts about themselves and their authority to enter into the agreement. These typically include assurances about legal status, authority to contract, compliance with laws, and absence of conflicting obligations. They help establish a baseline of trust and ensure that each party is entering the agreement knowingly and with the necessary capacity.
Why are representations and warranties of each party important?
These mutual representations and warranties are important because they protect both sides by confirming that the agreement is valid, enforceable, and not based on false assumptions. If one party misrepresents a key fact—like lacking authority to sign or being in breach of another contract—the other party may be entitled to remedies such as termination or damages. These provisions reduce risk, promote transparency, and help prevent legal disputes.
Understanding representations and warranties of each party through an example
In a software license agreement, both the software provider and the client may make representations. The provider might warrant that it owns the software and has the right to license it. The client may warrant that it is a validly formed business and has obtained necessary internal approvals. These mutual assurances help ensure that both parties are legally able to carry out their obligations.
Example of how representations and warranties of each party may appear in a contract
Here’s how a mutual representations and warranties clause may appear:
"Each Party represents and warrants to the other that: (a) it is duly organized and in good standing under the laws of its jurisdiction; (b) it has the full power and authority to enter into and perform its obligations under this Agreement; (c) the execution and delivery of this Agreement has been duly authorized; and (d) its performance of this Agreement does not violate any applicable laws or agreements to which it is bound."
Conclusion
Representations and warranties of each party are foundational elements of a well-drafted contract. They confirm that both parties are legally qualified and authorized to enter into the agreement, helping to reduce uncertainty and build confidence in the deal. These provisions are typically negotiated carefully and should reflect the actual status and intentions of the 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.