Reps and warranties Flashcards
CLAUSE: “Alice represents to Bob that she will paint his house next week.”
True or false:
This is a proper way to phrase Alice’s commitment.
False.
<ul>
<li>A representation can related only to a past or present fact.</li>
<li>Alice's commitment here is a <em>covenant</em>.</li>
</ul>
T/F: A representation can relate to a past fact.
True.
T/F: A customer might sometimes want a representation instead of a warranty.
False – the customer might be willing to <em>accept</em> a representation instead of a warranty, but the customer will <em>want</em> both if possible.
Q: In a sales- or services contract, will a <i>customer</i> normally prefer arepresentation, or awarranty? (Careful: Is this even avalid question?)
A: A customer will normally want <i>both</i> arepresentation <i>and</i>awarranty.
FACTS: Seller Sam is going to sell his car to Buyer Betty. Betty wants to know whether the car is in good condition. <br></br><br></br>Q: Will Sam want to give a representation, or a warranty?
A: Sam likely will want to give only a representation that, <i>so far as he knows,</i> the car is in good working order.
FACTS: Betty wants to sue Sam for misrepresenting the condition of his car. <br></br><br></br>Q: What things would she be required to prove in court?
A:
1. That Sam made a representation.
- That the representation was (A) false, or (B) misleading.
- That Sam was negligent in making the representation.
- That Betty relied on Sam’s representation (this will usually be a gimme if the rep is in the contract).
- That Betty’s reliance was reasonable (this will usually be a matter for Sam to <u>dis</u>prove).
- That the representation was “material.”
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FACTS: Sam is selling his car to Betty. His mechanic has told him that his car’s air conditioner will probably need to be recharged with coolant at some point in the next few thousand miles. <br></br><br></br>Q: Should Sam prefer: (i) to represent, or (ii) to warrant, that the car is in good working order?
A: Sam should consider:
1) specifically disclosing – in writing – what his mechanic has told him; and
2) <em>representing</em> that, <em>so far as he knows</em>, the car is in otherwise good working order.
He might also offer to pay up to $X to recharge the A/C unit if it needs it within X miles or X months after the closing (a conditional covenant).
FACTS: Sam <em>warrants</em> that his car is in good working order. Betty pays Sam for the car. Sam gives her the keys and the properly-signed title transfer. Betty drives away. Five minutes later, the car’s engine seizes up because all the oil had leaked out. <br></br><br></br>Q: What must Betty prove to be able to successfully make a claim against Sam for breach of his warranty?
A: Betty likely will need to prove only the facts stated, because Sam <i>warranted</i> that the car was in good operating condition.
Q: In a representation, what if any difference is there between “to the best of my knowledge” and “so far as I know”?
A: “To the best of my knowledge” MIGHT be argued to imply that the person making the statement conducted a reasonable investigation.
FACTS: Sam is selling his car to Betty. You are representing Sam. Betty wants Sam to represent that the car is in good operating condition.<br></br><br></br>Q: How could you reduce the chances of Sam’s later being accused of negligent misrepresentation because he didn’t have the car checked by a mechanic before representing that the car was in good condition?
A: Phrase the representation as something like, “Sam represents, to the best of his knowledge, <i>without his having made any particular investigation,</i> that the car is in good working order.
