Practical Law Glossary Item 8-382-3760 (Approx. 3 pages)
Representations and Warranties
A representation is an assertion as to a fact, true on the date the representation is made, that is given to induce another party to enter into a contract or take some other action. A warranty is a promise of indemnity if the assertion is false. The terms "representation" and "warranty" are often used together in practice. If a representation is not true it is "inaccurate." If a warranty is not true it is "breached."
In financing documents (such as loan agreements) representations and warranties are given by the borrower to induce the lenders to make loans. Once the loans are made, if a representation is no longer true, the lenders have the right to enforce their remedies against the borrower. While representations and warranties have different meanings and different remedies under law, in the context of a loan agreement, the differences are irrelevant because the consequences of an inaccurate representation or breach of warranty are provided for contractually in the loan agreement.