Material Representations and Warranties

What’s the difference between the two and when should you use each? A material representation is a statement of fact at the time the agreement is entered into. For example a material representation could be a statement about performance of a product or service. Warranties can be a statement of a future right or duty or a statement of fact at the time the agreement is entered into. You can have warranties that are a statement of fact. You can also have warranties that are both a statement of fact at the time the agreement is signed and also a future duty. For example:
1. A warranty that the party signing the agreement it has the right to enter the contract is a point in time warranty as of the date of signing.
2. Performance will comply with contract, laws, regulations, etc. This is a statement of a future duty.
3. No claims or liens exist. This can be both a statement of an existing fact but also a future duty to make sure liens or claims are not filed.
4. Product or Service doesn’t infringe the IP rights of a 3rd party. This can be both a statement of an existing fact but also a future duty to make sure there is no infringement in the future.
5. The Product or Service conforms to warranties and specifications of the contract. This can be both a statement of an existing fact about a current product of a duty applying to future products.
6. The product is free of defects in design. This can be both a statement of an existing fact about the design of a current product of a duty applying to future products or changes to the existing product.
7. The product is safe for use. This can be both a statement of an existing fact about the current product of a duty applying to future products or changes to the existing product.
8. The Product is new, and not re-conditioned. This can be both a statement of an existing fact about product or a duty applying to future products being sold under the contract.

A warranty is the highest level of commitment. A material representation is next highest. A firm commitment using the words will of shall is next. Based upon the term that you use to express the commitment, you may have different remedies. In most locations the breach of a material representation of an existing fact would allow you to rescind the agreement without liability and recover any monies paid (but not collect damages). The breach of the warranty provides you terminate the agreement for cause and claim damages.

In sales, salespeople frequently do what is called “puffing”, which means exaggerating their product or service’s performance or capabilities. If you are relying upon what they are telling you to make your buying decision, the best way to make sure it’s the truth is to include those supplier representations as either a material representation or as a warranty. If it were a material representation and it turned out to be false you would be able to rescind the agreement and get a refund of all payments. If you made it a warranty and it was false you could start the termination process where the party must cure the breach. If the breaching party fails to cure the breach within the agreed time frame, you then have the right ( but not the duty) to terminate the agreement for cause and claim damages. If the other party desn’t want to agree to either, don’t rely on what they have said as being factual and follow the rule of Caveat Emptor (buyer beware).

Whether you use Warranty or Material Representation really depends upon the impact it would have on you if the statement of fact were not true. If the impact was minor, having it be a material representation may work, as it will place you in the position you were before the contract. If the impact to you of the existing fact not being true would be substantial I would always make it a warranty so I can recover the damages.