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Transactions #2 - Reps & Warranties Pt. 2

November 24, 2016

Welcome everyone!

 

Some time ago I published a post trying to summarize what are the reps & warranties and what is their purpose. In this one, I will try to analyze the consequences of breaching them.

 

So what are the remedies for breaching the reps and warranties?

 

In case of a breach of warranty, the main remedy is a claim for damages, this is, money; and

 

In case of a misrepresentation, the main remedies are damages and the rescission of the contract.

 

In a claim for damages (available in case of breach of warranty and misrepresentation), the party claiming the breach or misrepresentation is to be put in the same position as if there has been no breach or misrepresentation. This is, there will be a evaluation of the value lost because of the breach of warranty or misrepresentation and the non-breaching party will be awarded with such amount.

 

There is a difference however between the claim in case of a breach of warranty and a misrepresentation. The breach of warranty is a breach of contract, whereas the misrepresentation is tortious claim (here is a good definition of Tort by Cornell Law).

 

As stated above, in case of a misrepresentation, the non-breaching party also has the ability of asking for a rescission of the contract (unless it is expressly excluded in the contract). 

 

The basis for rescinding the contract is the lack of proper consent from the non-breaching party when entering the contract. That misrepresentation jeopardizes the consent of the non-breaching party.

 

And this brings us to the issue of reliance, which we will talk about on another post.

 

Let me know your impressions and feel free to contact me at antoniodelaesperanza@gmail.com.

 

 

 

 

 

 

 

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