Monday, May 21, 2012
Over at Ken Adams' Koncision blog, he has a fascinating post and cri de coeur about how to present statements of fact in a contract. I recommend this post and this blog to practitioners who are interested in writing neat, clean, clear, and above all enforceable agreements. In this post, Ken urges contract drafters to eschew the magic words "representations" (or "represents") and "warranties" (or "warrants"). in favor of the simpler "states."
I think I agree with Ken that the phrase "represents and warrants" is reflexive boilerplate that creates confusion in most cases. Unlike Ken though, I think the terms have clear, separate meanings and that they retain their utility when used separately and precisely.
While I have not thought the issue through with Ken's gusto, I am far more inclined to be a traditionalist on such matters. "States" does not mean the same thing as "represents," and there are reasons to be persnickety about this. I may state that I am the very model of the modern major general, but that is very different from representing that I am. Having parties state things in contracts has no meaning in standard contract parlance, nor should it because one cannot rely on a mere statement unless it is accompanied by another statement, one which acknowledges that such reliance is warranted because the party stating the facts also represents that they are true. So, my inclination is to disagree with Ken's claim that only those of us introduced to the mysteries of the law can appreciate the difference between a statement and a representation.
I likewise disagree with Ken's claim that most practitioners could not identify the difference between a warranty and a representation or that their failure to respond satisfactorily when subjected to the terrors of my Socratic questioning is relevant to the issue of whether or not there is a useful distinction between the terms as a matter of contracts law. If the majority of practitioners said, "I don't know; I'd have to look it up," that would satisfy me, so long as people like Ken keep writing drafting manuals that explain the difference between a statement of fact and a warranty.
Ken says that courts do not really recognize the "magic words" ("represents and warrants") as operating as many people think they do. However, his evidence only states that you can create a warranty without invoking the words "warranty" or "guarantee." That evidence is not enough to persuade me that a carefully drafted contract should not clearly identify its warranties as such, and it seems to me that using some form of the word "warranty" is the best way to do so. As far as substituting the word "[party X] states" for "[party X] represents," with respect to factual statements/representations, I see the advantages of plain language, but beyond that, I think a representation is something more than a statement and therefore that the traditional language should be preserved.
Let the blawg battle begin!