An agreement for anything you want involves many important terms. Representations, warranties, and covenants are those building blocks that help create a solid foundation in agreements, ensuring that everyone knows what to expect and how to treat each other fairly. These clauses make the agreements reliable and strong.
Indian Contract Act does not define the terms representation, warranty or covenant.
What is a representation?
Representations are statements that convey information about past or present facts or circumstances.
For example, representations can be made by a seller of the property, stating that there are no structural issues and no pending legal disputes related to the property. Another instance of representation can be on any shopping portal where sellers describe the features, dimensions and materials used in their products.
What is a warranty?
Warranties are promises made regarding the current and future condition of a thing.
Warranties is a familiar term to us as consumers of products where sellers promise us regarding the quality, condition, and performance of the products.
What is a covenant?
Covenants are promises about what someone will or won’t do in the future. Covenants is a lesser heard term, but required in our daily activities.
For instance, if you rent an apartment, the rental agreement will have covenants that outline rules for the tenant, like not causing excessive noise and ensuring the premises are clean and in good condition.
Another example can be your job. Your employment contract may provide for covenants that state the responsibilities of an employee, from maintaining the confidentiality of company information to not competing with the employer during or after employment.
What happens when representation, warranties or covenants clauses are broken?
These clauses may or may not be true at the time the representation is made. If someone breaks a representation, it can make the whole agreement void.
Warranties are promises about something being a certain way, and they have to stay that way during the agreed time. Even if someone doesn’t believe a warranty, it still has to be followed.
Covenants are also promises, but they can impact an agreement’s future. If someone breaks a covenant, it can make the other person not have to do their part anymore. Breaking a covenant can make the agreement void.