What’s the difference between a representation, a warranty and a covenant in the contact you have in front of you?
Don’t know? You aren’t alone. A lot of people don’t understand the difference — or even think they’re pretty much the same thing. However, representations, warranties and covenants have vastly different jobs in a contract — and the remedies available to you if they are broken also differ.
What’s a representation?
A representation is a statement of fact about either a past or present event or condition. If someone makes a false representation in a contract (or to get you to sign a contract), you have the general right to back out of the deal.
For example, if you’re told by a used car salesman that a vintage Cadillac was owned by Elvis Presley,
and you buy it because of its history only to find out that it is actually “just like” a Caddy that Elvis once owned, that’s a false representation.
What’s a warranty?
A warranty is a promise about a present or future condition. If the promise turns out to be inaccurate, you may have a variety of options open to you as a remedy.
For example, imagine you buy a used car that has a warranty saying that all parts are working and guarantees that any issues that crop up in the next six months will be handled free-of-charge. When it turns out the air conditioner doesn’t work, you have every right to demand that the seller abides by the warranty given.
What’s a covenant?
A covenant is a promise or agreement about a future act. Some covenants are implied, while others are specific.
For example, imagine that you work for a used car salesman and you decide to branch out on your own. You signed an agreement, however, not to contact any of your former customers for a year so that you don’t “poach” those customers away from your former employer. That’s a covenant that could expose you to legal problems if you violate it.
Naturally, these are simple examples — and real-world examples — that can be complex to understand and follow. If you have a contract dispute involving a representation, warranty or covenant that was broken, seek experienced advice today.