Contractual Representations and Warranties

How to pronounce "Rescission" [Video] |

Question:

I have come across the following:

1) Representation………could be the basis for rescinding the agreement.

2) A breach of warranty ………does not permit the buyer to rescind the contract.

If the contract says: “The seller represents and warrants…”, then, could  the Buyer rescind the contract or not?

Answer:

There are three separate elements in a contract:

  1. Conditions,
  2. Warranties and
  3. Representations.

Conditions are indeed “dealbreakers”, so if they are not satisfied, waived or fulfilled, the transaction will not proceed.

Warranties are always collateral agreements. The deal will proceed, but the Seller will promise something. If there is a default, the damages will suffice.

Representations are somewhat different. They might fall under the law of contracts or the law of torts. They might be serious or they might be relatively unimportant.

If they are serious, then the Court might decide that rescission is an appropriate remedy. This would fall under the law of torts. If it is simply contractual, and the phrase “represents and warrants” is used then, damages are the appropriate remedy.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.