How do warranties and representations differ?

Warranties and representations serve distinct purposes in contracts and insurance agreements, with critical differences in their legal implications.

A warranty is a promise or guarantee that a specific statement, fact, or condition is true and will remain true throughout the duration of the contract. If a warranty proves to be false, it can lead to a breach of contract, permitting the injured party to seek remedies, such as damages or rescission of the contract. This guarantee emphasizes the certainty around the statement made, which has legal weight.

On the other hand, a representation is typically a statement made that is believed to be true at the time it is made but is not necessarily guaranteed. Representations are often used to persuade another party to enter into a contract, and while they can be acted upon, they do not carry the same binding legal commitment as warranties. If a representation is found to be false, it may provide grounds for a claim of misrepresentation, but the legal consequences differ from those of a warranty.

Understanding this distinction is crucial for navigating contracts, as the obligations and liabilities differ significantly based on whether the statement is categorized as a warranty or a representation.