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Answering Contract FAQs With Joshua D. Brinen

What is a representation in a contract?

A representation in a contract is a representation or fact that the seller or buyer promises is true, and is an inducement for the other party to enter into the contract. A representation must be true before the signing of the contract, and may need to be true at the signing of the contract, and may give rise to liability if not true.

What is a warranty in a contract?

A warranty in a contract is a statement in a written contract that facts are true on the date of signature. If those facts are not true on the date of signature, a warranty may give rise to liability and the ability to unwind the contract depending on how severe the breach of that warranty is.

What is a covenant in a contract?

A covenant is a promise that something will be true in the future, after the signing of the contract and the consummation of a deal, contrasting against a representation which occurs before a contract is signed, or a warranty which happens when a contract is signed. A covenant can live beyond the execution of a contract, and may extend beyond the termination of a contract.

What is materiality?

Materiality is a standard in contracts that eliminates all the titchy, usey, useless stuff from violating a contract. The small stuff, the off a penny here, off a dollar there kind of mistakes that happen in the contracting process in a transactional practice. Materiality is often stated in the written contract, and provides a bar below which the parties will not have a cause of action to sue the breaching party upon.

What is a materiality scrape?

Contracts often have a materiality standard in discussing the various representations, warranties, and covenants in a contract. When a buyer or seller includes a materiality scrape you are eliminating the concept of materiality for determining breach by either party of the representation, warranty, or covenant in a written contract. A materiality scrape means that even the smallest titchy little error will create legal liability for the breaching party.



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