Representations remain true: Overview, definition, and example
What does "representations remain true" mean?
"Representations remain true" refers to a clause or provision in a contract that ensures the statements or assurances made by one party at the time of entering into the agreement continue to be accurate throughout the term of the contract. These representations often cover facts about the business, property, or parties involved, and the "remain true" part means that these statements cannot be false or misleading during the duration of the contract. If a representation made by one party turns out to be false, the other party may have the right to take legal action, such as terminating the contract or seeking damages.
Why is "representations remain true" important?
This concept is important because it holds parties accountable for the accuracy of their statements and protects the integrity of the contract. If a party makes a representation about certain facts, such as the condition of a property, financial status, or legal compliance, they are essentially guaranteeing the truth of those statements. Ensuring that these representations remain true provides the other party with confidence that they are entering into an agreement based on accurate and reliable information. If these representations turn out to be false, the injured party may have legal recourse to remedy the situation.
Understanding "representations remain true" through an example
Imagine a company entering into a contract to purchase a commercial building. The seller represents that the building complies with all local zoning laws and regulations. The buyer agrees to purchase the building based on this representation. If, later on, it is discovered that the building violates zoning laws and cannot be used as intended, the seller’s representation is no longer true. The buyer may have the right to cancel the contract or seek compensation for any costs incurred due to the misrepresentation.
In another example, a business owner sells a product line to another company, and the seller represents that the intellectual property rights for the product are fully owned and free of any disputes. If it turns out that the intellectual property rights are in fact under dispute or claimed by a third party, the representation made by the seller is no longer true, and the buyer may have grounds to seek damages or undo the deal.
An example of a "representations remain true" clause
Here’s how a clause about representations remaining true might appear in a contract:
“The Seller represents and warrants that all statements regarding the condition of the property, ownership of assets, and compliance with laws are true and accurate as of the date of this Agreement. The Seller agrees to notify the Buyer immediately if any of these representations become false or misleading during the term of the contract.”
Conclusion
The concept of "representations remain true" is essential for ensuring that both parties in a contract rely on accurate and honest information when entering into the agreement. By including a provision that requires representations to remain true, businesses protect themselves from being misled or deceived, and they can seek legal remedies if a representation turns out to be false. This helps maintain fairness and trust in business dealings and provides a clear path for resolution in case of misrepresentation.
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.