Representations and warranties are statements in a transaction agreement about facts or commitments, with their scope and remedies set by the contract.
Definition
For an engineering firm owner, representations and warranties are negotiated statements made by a buyer or seller about defined matters in a transaction. Seller statements may address financial records, ownership, contracts, employees, disputes, compliance, or project information. The agreement sets qualifications, exceptions, disclosure schedules, survival periods, and possible remedies. What is covered depends on the wording, the parties, and applicable law. Owners typically support statements with records and disclosures, and buyers assess them during diligence. A representation or warranty is not a general assurance that every business outcome will continue unchanged, nor is it the same as an insurance policy. A statement may be limited by knowledge standards, materiality, dates, or disclosed exceptions. The terms can also connect to indemnification provisions that define responsibility for certain losses. Owners often compare the proposed statements with information collected for a transaction data room.
How owners use it
- An owner checks proposed statements about active project contracts against executed agreements and amendments.
- The seller records exceptions in disclosure schedules so the written statements reflect information available to the parties.
- If 28 of 30 requested contract files are located, 30 - 28 = 2 files remain to find or explain.
- The buyer uses diligence findings to discuss the scope, qualifications, and remedies tied to specific statements.
